Hedge Fund Collapse in Sweden Puts Spotlight Back on Quants

Hedge Fund Collapse in Sweden Puts Spotlight Back on Quants

Love LimanApril 22, 2021, 11:49 PM·3 min read(Bloomberg) -- As one of Sweden's oldest hedge funds shuts its doors, investors are trying to sort through the wreckage to figure out what exactly went wrong.Lars Ericsson, the chairman of soon-to-be defunct Informed Portfolio Management, says it's clear now that the quantitative strategies his fund used failed to cope with the market moves brought on by the pandemic. But he rejects the idea that quants have had their day. “There is definitely a future for quantitative hedge funds,” he said on Thursday.IPM, a systematic macro fund based in Stockholm, started bleeding client money more than a year ago, with about $4 billion in assets under management flowing out since late 2019.Ericsson says the fund's medium-term models failed to handle the shock that hit markets in early 2020.“When the pandemic came, it was a total surprise for the models,” he said.IPM then managed to come back from the brink, but bad trades that predated the pandemic came back to haunt the fund. Its relative equity models had been weighing on performance for years, due in part to a strategy relying on value stocks. This year, IPM's models misjudged the relative gains in interest