Below are the 5 biggest quant funds in the world. For a comprehensive list please see 10 Biggest Quant Funds in the World.
5. Renaissance Technologies
Quant pioneer Renaissance Technologies saw one of the biggest losses in its history from its three funds open to outside investors. Renaissance Institutional Diversified Alpha fund and Renaissance Institutional Diversified Global Equities fund fell in the range of 30% in 2020 while its Institutional Equities fund plunged close to 20%.
Its Medallion Fund, which is available only to Renaissance insiders, returned 76% last year.
Renaissance Technologies remained unsuccessful in accurately predicting market trends during the first half of the year, but the firm managed to trim losses during the second half of the year. In a September quarter letter to investors, Jim Simons said its losses were due to being under-hedged during March’s collapse and then over-hedged in the rebound from April through June. That happened because its trading models “overcompensated” for the original trouble.
Quant pioneer Renaissance Technologies, which manages $116 billion of assets under management and its 13F portfolio value stood above $100 billion at the end of the September quarter, seeks to diversify investments across several sectors. Zoom Video Communications (NASDAQ: ZM) is the largest stock holding of the computer-powered hedge fund.
Artisan Global Discovery Fund, which posted a return of 11.79% for the 3rd quarter of 2020, highlighted few stocks including Zoom Video in an investor’s letter. Here’s what Artisan Global Discovery Fund stated:
“Zoom’s enormous growth so far this year was on full display in Q2: 458% YoY growth in new customers (companies with >10 employees), 355% YoY revenue growth and a more than doubling in operating margins to 42%. Notable new customers included Exxon Mobil, Activision Blizzard and Service Now. While Zoom will not sustain this extreme rate of growth much longer—we and the company expect elevated customer churn on the other side of the pandemic—there are many potential long-lasting behavioral changes from this crisis that rely on videoconferencing (telehealth, less business travel, online education, etc.). Furthermore, Zoom’s customer base (15 million) still represents a small fraction of the total addressable market for video conferencing (400 million), and the company is in the early days of cross-selling additional products and services (Zoom Phone, Zoom Chat, Zoom Rooms) into its large customer base. However, given the massive YTD run and shares approaching our estimate of PMV, we pared our exposure during the quarter.”
4. Citadel Advisors
Kenneth Griffin’s Chicago-based hedge fund Citadel Advisors is managing $234 billion of assets under management and its 13F portfolio market value came in at $352 billion at the end of the September quarter. Its investment approach is based on combining vigorous research and advanced quantitative analysis to deliver consistent investment results.
The hedge fund is seeking to make several changes in its stock portfolio to capitalize on profit-making opportunities. It had initiated a position in 1620 stocks during the third quarter and exited stakes from 1308 stocks.
Amazon (NASDAQ: AMZN) is one of Kenneth Griffin’s favorite stock investments and it appears that the firm has benefited from its AMZN position. Several other hedge funds are also bullish on Amazon. L1 Capital International Fund, which has generated more than 5% return in the third quarter, highlighted few stocks including Amazon in an investor’s letter. Here’s what L1 Capital stated:
“Several investments in the technology sector were trimmed on valuation grounds with the proceeds used to increase our investment in Amazon. Amazon’s successful flywheel business model and Amazon Web Services are well known. However, we believe the current share price under‑appreciates:
– The consistency and longevity of Amazon’s growth potential in its key businesses;
– The importance of additional revenue streams such as advertising which are high margin and growing rapidly; and
– The strengthening barriers to competition and competitive advantages arising from Amazon’s stepped‑up investment in logistics and other infrastructure.”
3. Bridgewater Associates
Raymond Dalio’s Bridgewater Associates is a global macro firm that applies quantitative investment methods when picking new stocks for investments while avoiding unrealistic historical models. The hedge fund is managing $235 billion in assets under management and the market value of its 13F portfolio hovers around $8.3 billion. Bridgewater’s Pure Alpha II fell 17% through November amid increased volatility.
Other than plain vanilla index funds, SPDR Gold Shares (GLD), Alibaba, Walmart (NYSE: WMT) and Procter & Gamble (NYSE: PG) were the biggest stock holdings in its portfolio during the September quarter.
2. AQR Capital Management
The co-founder of systematic investment giant AQR Capital Management Cliff Asness is optimistic that value stocks have started rebounding at the end of the last year. He expects value stocks to extend the momentum into the first half of the year.
“After ‘sinning a little’ towards value, talking about it constantly, and yes, rooting for it with all our hearts, it is very tough to see its initial comeback not only fail to change our fortunes but hurt them a little more,” Asness said.
AQR Capital Management is overseeing $248 billion of assets and its 13F portfolio value stands around $59 billion at the end of the September quarter. Apple (NASDAQ: AAPL) is the largest stock holding of AQR Capital Management and the firm has benefited from its largest position in 2020. This is because shares of Apple rallied significantly last year.
Alger Spectra Fund has presented a bullish case for Apple in an investor’s letter. Here is what Alger Spectra Fund stated:
“Apple is a leading technology provider in telecommunications, computing and services. Apple’s iOS operating system is the company’s unique intellectual property and competitive strength. This software drives extremely tight engagement with consumers and enterprises. This tight engagement is facilitating significant growth in high-margin services like streaming music, apps, and Apple Pay. Apple’s continued development of high-margin services and earnings streams for wearable devices as well as the potential contribution of 5G phones to the company’s growth supported the performance of Apple shares.”
1. Millennium Management
Millennium Management, which is managing $276 billion of assets, has been employing hundreds of teams to pick the right investment opportunities. The firm invests about two-thirds of its capital in value fundamental equities and statistical arbitrage strategies. Izzy Englander’s Millennium Management has generated one of the best profits in 2020. Its multi-strategy hedge fund rose more than 23% through Dec. 17.
Last year, Millennium hired a Paris-based quant team led by Maxime Kahn to enhance returns from quant strategies. In addition, the firm has also added other big names like former Nomura and Barclay’s quant trader Derrick Li and former Hutchin Hill founder Neil Chriss to its quant roster.
Put positions in Apple is its largest holding while its total 13F portfolio market value stood at $81 billion at the end of the September quarter. Millennium’s largest plain vanilla stock position was Tesla Inc (TSLA) at the end of September. Tesla shares gained earlier this month after Wedbush analyst Dan Ives increased its bullish scenario price target to $1250. Here is what we said about it in an article:
Wedbush’s new base price target for Tesla stock is $950, which is more than $100 higher than where the shares are currently trading. However, Ives still rates them at Neutral, which is the rating he has had on them for almost two years, according to MarketWatch.
Ives believes the core of the bull thesis for Tesla stock is China, where consumer demand for electric vehicles has skyrocketed over the last year. Chinese consumers are snapping up not only Tesla’s Model 3 but also EVs from “impressive” domestic firms like Nio, Xpeng and Li Auto. Ives added that even though competition is on the rise, Tesla is still on “top of the EV mountain.”
He believes Tesla will deliver more than 1 million vehicles next year and expects deliveries to approach 5 million annually by 2030. Ives noted that more than 150 automakers are “aggressively” pursuing EVs, but he believes “it’s Tesla’s world and everyone else is paying rent.”
We believe Tesla is a binary outcome stock at its current price. It will either be a very big long-term loser or it will go up another 500% over the next 5 years. We shared Chamath Palihapitiya’s recent TSLA views in this article.
Please also see Billionaire John Paulson’s Top 10 Stock Picks and Billionaire Louis Bacon Shuns Bitcoin, Returns 70% By Betting On These Stocks.
