I don't have a subscription so I can't see the whole thing. Do they reveal anything else of interest besides the wanting performance of the fund and the departure of the CIO?
3% loss over six months for a fund of low volatility algorithms? That's fairly significant. I bet a good bunch of these algos only hope to make 3-5% annually. So this is a significant loss. You'd think even if some algos were performing poorly, it would be compensated for by algos that perform well, and at least cancel out the losses.
So How is this even possible that the fund is performing so poorly?
My thought is that the selection process so emphasizes low volatility and market, sector, and dollar neutrality that probably according to those criteria the fund is a raging success. Probably a straight downward sloping line for six months.
Harder to control for alpha factor exposure? Perhaps too many of the algos depend on certain market conditions for their alpha, which the current extreme low volatility regime doesn't provide.
Another thought is that backtesting can't account for how other market participants will react to your algorithms' trades. This is perhaps a significant variable.
Another idea, just because an algorithm continues to perform out-of-sample, doesn't necessarily mean this is statistically significant. With thousands of algorithms you'd expect a bunch to continue to perform out of sample by chance.
Still a bit baffling nonetheless. The selection process is rigorous.