IPM had used quantitative strategies that relied on mathematical models rather than analyzing the portfolio’s assets on the ground. However, the historical statistical models produced by the fund proved unequal to the task of predicting how markets would move during the volatility caused by the coronavirus pandemic.
“We believe that quantitative hedge funds definitely have a future,” said IPM CEO Lars Ericsson in an interview. “But for our part, from a business perspective, we couldn’t go any further on the basis of our assets.”
IPM joins a growing list of hedge funds that have closed in recent years as investors rethink their allocation to the industry. According to Hedge Fund Research Inc., more hedge funds have closed in the past six years than they started, with 770 closing in 2020.
Last year was particularly difficult for computerized quant funds. Algorithms have largely failed to decipher the effects of a fast-moving virus and central banks’ response to containing economic damage. The market sell-off last March and the rebound that followed humiliated some of the most demanding quants – most notably giants like Renaissance Technologies, Winton and Two Sigma.
IPM was founded over two decades ago. Catella was hoping to find a buyer for the troubled fund, and several new hires were even announced recently to develop new strategies.