In the past four weeks investors have increasingly mentioned an increased interest in high velocity, short-term trading, and quantitative managers. Wealth advisors, fund of hedge funds, and consultants are all interested in sitting down with these algorithm based managers to see if they can gain some competitive indicator based edge as the global markets begin to ease their downward spiral.
The black box funds, which fell out of favor during 2008 at the height of the crisis for breaking down in the face of a catastrophic market collapse, are well positioned to evaluate the subtle economic indicators of a potential recovery before it is widely discovered. These high velocity trading strategies are also highly liquid, and this is continuing to help drive interest in these types of funds.
An analyst at a midsize family office in London mentioned that they are currently turning to quantitative funds in the hopes that the financial indicators that signal an economic recovery will trigger these funds to make the correct directional bets and potentially earn substantial profits. Timing is everything in a market recovery and investors are betting on the complex algorithms to be able to properly assess the proper timing ahead of fundamental analysis that takes far more time.
Whether these black boxes will actually be the first to position themselves for a recovery remains to be seen. However, Brighton House is able to stay abreast of all the trends and developments of the market because of its unique position in the industry as a connector between both managers and investors. BHA will continue to monitor this trend throughout the remainder of 2009.
Disclosure: No Positions