Back to the complete issue
Thursday, 2 February 2017

Quant funds make it to the all-time top performer lists, research analysts disappearing

Are we in the End Times for investment bank research analysts, whose numbers dropped by one-tenth since 2012? (That’s the dictionary definition of decimation, by the way…) The Financial Times’ Robin Wigglesworth, a former Middle East hand for the salmon-coloured paper, blames cull on regulatory change and says “the cuts are expected to deepen in the coming years.” He says “a survey of 30 global investment groups and investment banks by Quinlan & Associates last year indicated that research budgets would be cut by 30 per cent.” Wigglesworth gives the example of David Ader and Ian Lyngen who were earlier this year voted the top US Treasury analyst team in Institutional Investor’s prestigious poll for the 11th year running, “but at the time both were unemployed as CRT Capital Group, their company, was in the process of being shuttered.”

The inimitable Matt Levine also tackled the topic in his Bloomberg column yesterday, noting, “Investment bank research is a grim business, because it’s hardly a business at all. A business is, like, you make a thing, and you convince me to buy it, and I give you money for it. Research, classically, is: You make a thing (a research report), and you give it to me for [without charge], and I trade some stocks with your bank and you maybe get credit for some of the commissions. That model has fallen apart in recent years.”

Quant funds are taking over the world: Computer-based hedge funds have been admitted to a list of the all-time top 20 best performers who made the most money since inception for the first time, Lindsay Fortado and Miles Johnson write for the Financial Times. “DE Shaw, Citadel and Two Sigma, which all incorporate so-called ‘systematic strategies’ that trade using computer algorithms, joined the closely followed annual list compiled by LCH Investments, the fund of hedge funds run by the Edmond de Rothschild group… DE Shaw, which manages [USD 27 bn] in assets, entered the list in third spot, while Ken Griffin’s Citadel joined at number five. Two Sigma came in 20th place.” However, the list was topped by Ray Dalio’s Bridgewater, the world’s largest hedge fund, which made USD 49.4 bn since it launched in 1975. Second was George Soros’s Soros Fund Management with USD 41.8 bn since 1973 and despite a net loss of USD 1 bn in 2016. The research also found that the top 20 funds generated 46.9% of all the gains made by the industry since inception, while only accounting for 17.6% of the assets.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.