An abrupt reversal in many of this year’s most-persistent market trends has hurt a cluster of computer-driven funds.
Caution gave way to euphoria in financial markets when Pfizer Inc. and BioNTech SE said their coronavirus vaccine was more than 90% effective on Nov. 9. Shares of companies that have suffered in the pandemic leapt, as did government-bond yields and energy prices—a pattern that repeated with the arrival of promising results for Moderna Inc.’s vaccine Monday.
That was bad news for investors who aim to ride winning assets higher and losing markets lower, a popular quantitative strategy known as momentum investing. A gauge of performance by members of the S&P 500 classified as momentum stocks slumped almost 14% on Nov. 9, according to JPMorgan Chase & Co. That was the biggest one-day loss for the grouping since at least the mid-1980s.
Among those caught out: A momentum fund run by AQR Capital Management LLC that manages $3.4 billion in stock, bond, commodity and currency futures. Class I shares in the mutual fund dropped 2.9% on the day of the Pfizer news, according to FactSet, one of their worst days since inception in 2010. A spokesman declined to comment.
AlphaSimplex Group LLC was another to feel the pain. Stung by bets against oil and bond yields, as well as wagers on haven currencies like Japan’s yen, the firm’s managed futures fund lost 2.6%, its second-biggest fall of 2020. Profitable bets on agricultural commodities and stocks cushioned the blow, and the fund is up over 7% for the year.