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Hedge Funds

BlueMountain liquidating its $1 billion quant portfolio

Andrew Feldstein, partner and chief investment officer of BlueMountain Capital Management

BlueMountain Capital Management is liquidating its $1 billion computer-driven portfolio, as it shifts back to focus on its roots: human-run fixed income and credit.

The hedge fund's outside spokesman Tom Vogel confirmed that BlueMountain is selling all of the positions in its quantitative portfolio, but wouldn't comment on the size. However, two people familiar with the matter say it's about $1 billion. The systematic portfolio gained 4.4% last year, Mr. Vogel said. It fell about 1% in 2017, according to one of the people.

BlueMountain, founded by Andrew Feldstein and Stephen Siderow in 2003, is pivoting to focus on where it started, investing in credit markets, one of the people said. Its quant strategy is run by Perry Vais. The hedge fund, which also invests in equity, global markets and private investments, manages about $19 billion.

Quant hedge funds have struggled from lackluster performance, investor withdrawals and rising costs. Systematic trading funds lost 3.6% in April, Goldman Sachs Group (GS) said in an April 26 note. That's the worst month since January 2015 when the bank started tracking the data. The losses were spurred by funds crowding into wagers against stocks and momentum trades or betting on short-term market trends.

In April, BlueMountain said it was weighing options for its systematic strategy. At the time, Mr. Vogel said the New York-based hedge fund was assessing some of its strategies to address "clients' needs, respond to changing markets and optimize performance."

"In this context, we've decided to make changes to our systematic strategy as it is configured now, and are exploring various options for doing so," Mr. Vogel said at the time.

BlueMountain's machine-learning business has faced some internal strife. In 2017, Bloomberg reported that the firm's quant talent struggled to gain enough influence over investing and some staffers were frustrated with their subordinate roles and left the firm in favor of tech giants such as Google where technologists are the stars.

Among quant fund losers last month was AQR Capital Management's Equity Market Neutral Fund, which slumped 4.8% in April and 6.9% this year, according to its website. AQR's billionaire co-founder Cliff Asness acknowledged in a September blog post that the firm's strategies experienced "tough times."