Type Private Founded 2006 (2006) Number of employees 35 | Industry Investment Management AUM ~$1.3 billion (2016) | |
Headquarters | ||
Quantedge Capital is an alternative investment asset manager based in Singapore and New York City. As of June 2014, it manages over US$1 billion under its flagship Quantedge Global Fund primarily on behalf of high-net-worth individuals, family offices and institutions. Its name is a portmanteau of "quantitative" and "edge".
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Firm overview
Founded in 2006, the firm has 35 employees based in Singapore and New York. Its flagship fund was semi-soft-closed to outside investors in 2014.
Investment strategy
Quantedge employs a systematic investment strategy that uses statistical models to pick trades across major macro asset classes such as bonds, equities, commodities and currencies. The fund has an investment universe of 180 instruments and typically invests in about 90% of these instruments with no more than 5% allocation to a single instrument. Hence, the portfolio is exceedingly diversified as the managers believe that "ultra-diversification" helps to enhance the overall portfolio's risk-adjusted returns. It also uses dynamic asset allocation to overweight more attractive instruments and underweight less attractive ones. Quantedge also targets constant volatility of 30% in annualized terms and it does not employ short-term day-trading strategy; holding on to its positions ranging from weeks to several years.
Investment returns
Since its launch in October 2006, the firm's Quantedge Global Fund has averaged over 27% annual returns after fees with a first-half 2016 return of 40%. The fund has delivered positive returns for most years since inception, except in 2008 (-22.6%) and 2015 (-18.3%). Its largest annual gain was in 2010 with an 82.4% return. The outsize returns set the firm apart in the hedge-fund industry. Hedge funds globally have produced an average annualized return of 3.61% as of the end of June 2016 while similar quantitative funds have produced an average annualized return of 5% over the same period, according to data provided by fund tracker HFR Inc.
The fund's track record makes it one of the most successful hedge funds as ranked by AsiaHedge, Bloomberg, Barrons and HSBC amongst others. Other notable hedge funds with similar outstanding long-term performance in past include the legendary Medallion Fund by Renaissance Technologies and George Soros' Quantum Fund whom are both closed to outside investors since the 1990s and early 2000s respectively.
High target volatility
Quantedge targets a very high level of volatility for its portfolio relative to other hedge funds. As a result, the fund expects to experience a 10% to over 40% loss periodically which is in-built and unavoidable part of their strategy. During the 2008 financial crisis, Quantedge experienced a 45% maximum drawdown or loss before ending the year with a narrower 22.6% loss. Hence, the fund is selective in accepting only investors who understand its strategy and are able to tolerate high levels of short-term volatility in exchange for attractive long-term returns.
Lack of marketing team
The firm does not prioritize marketing of the fund and has not engaged any third party marketers. Critics highlight that this may explain the slower growth of its managed assets in spite of its strong performance.
Others
To accommodate new investor interest, some early investors of Quantedge set up independent fund-of-funds (FoF) vehicles to allow continued investments into the fund after its semi-closure in 2014 such as: