Wall Street is tallying up the winners and losers after the severe market reaction to last week’s Brexit vote. One theme has emerged early—the computers got it right and the humans got it wrong.
Yet for one set of computers that form strategies about the markets, such sentiment wasn’t even considered.
This fund category, sometimes called commodity trading advisors, or CTAs, uses customized trading algorithms to spot market trends and place bets on futures and other derivatives. Most of the models didn’t factor in British election polls, bookmakers’ odds or the political-tea leaf reading that swayed other investors looking for an edge.
In the weeks leading up to the Brexit vote, the trading models at many of these firms adopted a defensive pose. They favored high-quality government bonds, gold and safer currencies like the yen, while mostly avoiding riskier bets like oil and emerging markets.
Société Générale’s CTA Index gained 1.5% on Friday. AQR Capital Management LLC, Fort and Welton Investments Partners LLC were among the big gainers.”