{"text":[[{"start":11.76,"text":"Quant hedge funds had their worst day in more than two years, in a session that coincided with the US Treasury’s efforts to shore up the government bond market and sharp share price moves."}],[{"start":21.8,"text":"Wall Street banks told clients this week that quant funds, which use computer-driven strategies to systematically trade across asset classes, were down significantly as markets remained volatile. Funds that had big exposures to the “momentum” factor, or buying stocks that are already going up and selling those that are going down, were hit particularly hard."}],[{"start":41.64,"text":"Goldman Sachs wrote to clients on Wednesday afternoon in New York that its “global momentum” index was well outside historical norms, with systematic long-short hedge funds down 1.4 per cent as of 1pm Eastern time, their worst day in more than two years, according to a note seen by the FT. Goldman declined to comment."}],[{"start":60.6,"text":"While momentum trades often mirror the market, Morgan Stanley said in a note to clients it was the first time in at least five years the bank had observed its “pure momentum” index down more than 4 per cent while the broader S&P 500 index was higher on the same day, according to a note to clients seen by the FT. Morgan Stanley declined to comment."}],[{"start":81.56,"text":"Investors navigated a tumultuous trading day on Wednesday, putting further pressure on momentum trades that have been unsettled since the AI-related stock sell-off several weeks ago."}],[{"start":91.12,"text":"The Treasury announced it would “at least double” purchases of long-term government debt in an effort to steady the market, while shares of vaccine maker Moderna nearly tripled after announcing successful trial results for an experimental skin cancer therapy."}],[{"start":105.24,"text":"Despite the whiplash of recent weeks, systematic long-short funds were still up 1.7 per cent so far this month, according to Goldman’s note."}],[{"start":114.08,"text":"One portfolio manager at a large asset manager said it “doesn’t take a lot of [Modernas] to get risk managers to freak out a bit”, referring to how much the drugmaker’s stock had surged."}],[{"start":123.12,"text":"“Volatility is exceptional, so options makers are losing money left and right,” said one hedge fund manager. “The market is rotating every day, so what makes money today is almost always down tomorrow.”"}],[{"start":134.64,"text":"The losses among quant firms follow a brutal July, in which a weeks-long sell-off in AI-related stocks caught Wall Street off guard. Many hedge funds suffered monthly losses. The most high-profile casualty was Situational Awareness, the highly leveraged AI-focused fund which was ultimately forced to sell most of its public stock positions at a steep discount to Citadel."}],[{"start":156.4,"text":"Even financial firms that are known to reliably make money took a hit. Jane Street, the secretive trading shop that has emerged as a dominant player in global markets, posted a roughly $15bn loss last month as a result of its bet on Situational Awareness and related AI stocks."}],[{"start":173.24,"text":"“If you have a seven Richter earthquake, in the subsequent days you will have tremors,” said a top quant hedge fund executive. “You don’t just go to zero. [Market participants are] taking risk down.”"}],[{"start":184.52,"text":"Quant hedge funds have run into difficult periods before from factor investing, which involves investing in securities based on certain underlying drivers, such as “value” or “growth”. In 2018, the industry was subsumed by a “quant winter” that dragged on for years as automated investing strategies sputtered and struggled to make money."}],[{"start":202.88,"text":"Additional reporting by Costas Mourselas in London"}],[{"start":211.16,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1787282517_9980.mp3"}