In this article, we are rating the top 3 funds that we always talk about in terms of Risk-Adjusted returns, Management and Investor-Friendliness. We hope having a rating system would help our readers better understand the funds.
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1. Quantedge Global Fund
[Featured photo: Sealing the agreement for The Quantedge Foundation Scholarship under SMU Access initiative are (from left to right): Directors of Quantedge Foundation, Mr Lee Jia An and Mr Suhaimi Zainul-Abidin; SMU President Prof Arnoud De Meyer and Prof Tan Chin Tiong (Senior Advisor to SMU President).
Risk-Adjusted Returns ☆☆☆
With annualized returns of 25% over a decade and up 38% in 2017, Quantedge has been described as "one of the world's standout hedge funds in recent years" but also a "high-risk" fund which might "face losses as volatility surges" because of its 30% volatility target in its risk-premia model.
Management ☆☆☆☆
Founders Chua Choong Tze and Leow Kah Shin have known each other since high school and have worked together for more than ten years since the fund started with 3 million from friends and family. However, they recently stepped down from management to become heads of research. The new CEO Suhaimi Zainul-Abidin was a partner at Allen & Gledhill and has been with the firm as in-house counsel.
Investor-Friendliness ☆
The fund has monthly liquidity but recently introduced fixed three- and five-year share classes, and will close new subscriptions into the monthly vehicle. Monthly newsletters also stopped having commentary.
2. Schonfeld Strategic Partners Fund
Photo from Bloomberg: Ryan Tolkin, from left, Steven Schonfeld, and Andrew Fishman
Risk-Adjusted Returns ☆☆☆☆☆
Schonfeld beat many of its larger quant competitors including Millennium, AQR, Two Sigma and Man Group with a gain of 17.1% last year, and also this year despite markets being flat to down. The fund’s objective is to make money for Steve Schonfeld who is the firm’s largest client. “Steven wants to make 20 percent a year, and do it at a 3 Sharpe” ratio”
The fund’s Sharpe ratio has risen to an off-the-charts 14.5 this year despite market turbulence, thus earning it our 5-star ratings. There have been concerns about the use of leverage to achieve its returns. The firm has expanded beyond its core US markets by opening an office in Europe “where banks are disbanding proprietary trading desks” and Asia with the acquisition of Folger Hill.
Management ☆☆☆
Andrew Fishman has been in the firm for over twenty years even before the fund was launched. Ryan Tolkin joined the firm as CIO in 2015 before he turned 30, which got him featured in Forbes 30 Under 30. Tolkin and founder Schonfeld have known each other for a long time, so top management level should be stable.
However, we note the changing of the long-term CFO in 2015, and the recent departure of a member of the research team to a rival firm. The management team can improve its breadth and depth given the complexity of the firm.
Investor-friendliness ☆☆
In place of a set fee, the hedge fund requires investors, including Steven, to pay its total operating costs. The firm “says that amounts to more than the standard 2 percent management fee and 20 percent incentive charge”. This is not unusual among multi-strategy quant shops such as Millennium and the fund explains that “the quants tend to be larger teams, more expensive teams – not just the personnel but technological investment, data investment”.
The fund provides a one-pager each month but without commentary. There is a breakdown by strategy, geographic and sector exposure, but that doesn’t really tell you much. That said, Andrew and Ryan are open and candid when you do get in touch with them, given that these hands-on guys have very busy schedules including doing international travel and recruiting managers.
Ryan provides some insight into the types of people the firm hires and we see this as a positive step to demystifying quant funds: https://www.youtube.com/watch?v=w1X7SneGjng
What are your ratings on these funds? If you have any thoughts/suggestions, please message us or email us at contact@hedgequery.com