Systematic equity fund Quantology's market signals are "strongly positive", despite July dip

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French systematic long/short equity hedge fund Quantology Capital Management’s flagship fund suffered its third consecutive down month in July, but its models are already exhibiting more positive signals for the period ahead.

The Quantology Absolute Return strategy, a computer-based long/short market neutral equity fund which trades Nasdaq and NYSE-listed stocks, ended last month some 0.30 per cent in the red in its USD share class. The slide leaves the fund – which finished 2020 up 6.8 per cent annually – nursing a 1.5 per cent loss since the start of 2021.

Quantology – which uses market-agnostic, algorithm-based processes to generate returns from behavioural finance indicators, share price trends, and other stock signals within companies’ quarterly earnings data – noted certain earnings releases brought positive returns for the strategy.

The firm was surprised by the number of US stocks printing all-time highs, driven by sharp upside moves on earnings news. These included software developer Atlassian, IT services advisory Gartner, and Snap, the social media and camera company which developed SnapChat.

Among its key shorts, meanwhile, were CoStar Group, the commercial property analytics and information provider, and energy drinks manufacturer Monster Beverages.

The firm said that in the past month, its models exhibited more positive signals, particularly in the listed tech space, while negative signals were concentrated on "old economy" stocks, "taking a much-needed breather" following a strong first half of 2021.

"The implication of retail non-professional investors in equities has increased the importance of psychology over value/growth principles," Quantology co-founder and portfolio manager Julien Messias said in an email to Hedgeweek.

"For Quantology models, the more players there are - whether professional or retail - the better."

He added: "As of now, two weeks into the Q2 earnings season, our sentiment is strongly positive-biased."

Paris-based Quantology – which recently unveiled a new fund, Quantology US Equity, which aims to outperform the Nasdaq 100 Index – said the flagship increased its gross exposure to 98 per cent at the end of last month, keeping a neutral net exposure.

On average, quantitative directional hedge funds advanced 1.67 per cent in July, according to Hedge Fund Research data, and are up 9.51 per cent since the start of the year.

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Hugh Leask
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