Chinese computer-driven “quant” hedge funds experienced significant losses in the first half of the year, underperforming traditional stock strategies domestically and other popular global fund strategies, according to a report by Reuters.
The report cites recent data from China Securities as showing that quant hedge funds trading China’s onshore A-shares averaged an 8.6% loss in the first half of the year, in stark contrast to the 3.2% gain seen for the whole of 2023. Those tracking the small-cap CSI 1000 Index, meanwhile, were hit even harder, plummeting 14%.
Onshore equity hedge funds by comparison saw a more modest 3% average loss, according to China Securities.
These dismal performances come amid increased regulatory scrutiny of the $200bn industry as Beijing looks to restore retail investor confidence. In February, China imposed stricter trading regulations including curbs on short-selling and high-frequency trading, causing turmoil.
“The quant crisis in February acted as a stress test in an extreme environment. Funds that were less affected and can rebound quickly will set themselves apart,” said Erin Wu, head of investor relations at OP Investment Management.
