Quant funds significantly outperformed this year, continuing their strong performance since 2021 after a prolonged difficult period from 2015-2020. But what was behind the resurgence?
To start, thePivotalPath Equity Quant Index is up 5.1% YTD through November. Additionally, our Managed Futures Index and a related strategy, Global Macro Quant Index, are the category’s biggest performers, up 14% and 16%, respectively. As our CEOJon Caplis shares withJulie Segal, it’s not due to just one factor. In fact, the return of strong trends in rates and currencies (since Q3 of 2021) coincided with a significant rebound in numerous factors, with value leading the way. This year’s performance is in line with value’s peak return 2009, when it generated 24.1%. Additionally, common factors such as size, momentum, and quality are also behind the comeback.
But what’s perhaps most interesting is how human nature factors into these moments. It’s hard to predict when the next trend will emerge or which factors will perform well year-to-year, even with long term risk premiums built in. And unfortunately, it’s just as hard for investors to remain disciplined and not redeem from strategies that benefit from these conditions during the down years.
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