Quantitative hedge funds start 2011 with strong returns

Equity market neutral hedge fund managers are finding better ways of constructing portfolios and managing risk. Those managers are expected to survive the current downturn and outperform in future.

European quantitative market neutral funds made good progress in 2010 with more managers posting solid, double-digit returns than at any point since 2007. But such is the lot of quant funds that a crisis always seems to be around the corner.

As if on cue the performance of a number of common quant factors reversed sharply in mid-January, threatening to derail managers positioned to capture prevailing factor trends.

European growth, quality and momentum factor returns, which had outperformed in the