Systematic hedge fund Quantology’s earnings-based strategy rises on US internet bets

Financial analysis

Paris-based systematic hedge fund Quantology Capital Management – which trades US equities using a quarterly earnings-based quant model – has generated positive returns from IT and internet positions, and now sees US markets firmly in “risk on” territory.

The firm’s Quantology Absolute Return Fund - a systematic long/short US market neutral equity strategy which takes long and short positions in Nasdaq and NYSE-listed companies - added 0.3 per cent in its main dollar-denominated share class in August, putting its year-to-date return at 5.4 per cent.

Its euro class is up 4.8 per cent in 2020, having risen 0.2 per cent last month.

Positive momentum in mid-cap internet stocks generated gains in the long portfolio, with Liveperson and GoDaddy seeing particularly strong Q2 earnings. Meanwhile, short bets in certain “falling angel” IT companies such as Cisco and Intel also paid off.

In a recent fund update, Quantology put its market indicator, based on recent US earnings signals, firmly in ‘risk-on’ mode.

Portfolio positions in the fund are picked according to stock signals following quarterly earnings reports, using a proprietary model based on Post-Earnings Announcement Drift, aimed at generating uncorrelated positive returns to equities regardless of market environment.

The strategy, which has some USD53.2 million of assets under management, is led by portfolio manager and Quantology co-founder Julien Messias, who established the firm along with founding partner and chairman Vincent Fourcaut in 2013.