China quant hedge funds suffer double-digit losses in October tech rout

Quantitative hedge funds based in China faced significant losses in October following a steep downturn in the technology sector, according to a Bloomberg report. All six long-only strategies monitored by China Merchants Futures experienced declines of over 10% during the month, resulting in year-to-date losses of at least 6%. Market-neutral strategies, which utilized short positions to hedge market exposure, also suffered, with declines ranging from 3% to 5%.

The CSI 1000 Index-linked funds were particularly adversely affected, experiencing a 16.7% drop in October and accumulating annual losses of 13%. Strategies associated with the CSI 300 index declined by 11%, leaving them down 8.5% for the year, as China's benchmark index recorded its worst monthly performance in over a decade. Quantitative managers also underperformed their benchmarks in all six long-only strategies during October, with the largest shortfall amounting to 4.4 percentage points against the CSI A500 Index.

However, the strategies managed to maintain some relative outperformance for the year, with CSI 2000-linked products outpacing their benchmark by 18.5 percentage points. According to separate data from Shenzhen Golden Axe Fund Sales, 68 CSI 1000 index-enhancement products suffered an average loss of 9.3% in the final week of October, with all but one fund recording losses for the year, with the most severely impacted fund down 26%.