Quant funds just suffered their most crippling trading rout this year as momentum stocks flopped

By Jules Rimmer

Unwinding crowded trades cost quant funds 1% in performance on Monday alone

Systematic trading funds represent a significant investment class and account for a large percentage of daily trading volue in most major equity markets

The second quarter of 2026 is ending very badly for so-called quants, those who rely on mathematical models to drive their investing decisions.

After a decent first half, managers following this trading strategy have just suffered their steepest losing streak since Dec. 2023. In the last five sessions alone, they have been hit with a drawdown of 3.1%.

And it's not the market direction that's causing all the trouble. After all, the S&P 500 SPX has lost just 0.43% in this period. It's the forced unwind of crowded trades that's inflicting all the pain.

The revelations of severe losses, including an aggregate 1% loss on Monday alone, were highlighted in a desk note sent to clients from Goldman Sachs on June 29 that analyzed the recent performance of systematic long/short funds. Systematic funds are active trading strategies that deploy algorithms, statistical models and data-driven insights, rather than fundamental research, to drive performance.

Systematic L/S managers/ Rolling 5-day performance. This move is extreme.

The Goldman note observed losses were spread across all regions, including America, Europe and Asia.

A separate calculation from Citi found momentum stocks suffered their fourth-worst performance in 22 years, as Magnificent Seven MAGS stocks slumped on Friday.

"Sharp drawdowns like this are an inherent feature of systematic investing and should not come as a surprise to experienced investors," said Bruno Schneller, managing partner of Zurich-based Erlen Capital. "Quantitative strategies are not immune to periods in which statistical relationships break down.Episodes of heightened volatility can create significant short-term dislocations."

Schneller went on to explain how interconnected markets are these days so shifts in risk appetite and geopolitical developments can swiftly ripple through multiple asset classes and equity sectors. So, while these episodes appear dramatic, they are simply part of the "normal rhythm" of quantitative investing.

The Goldman client note emphasizes that despite the last five tumultuous trading sessions, performance across the systematic space is still positive for 2026 to the tune of 11.3%. That compares favourably to the S&P 500, the MSCI ACWI ACWI and U.S. Treasury bonds GOVT.

Schneller is confident enough to predict that, "Unless we see evidence that the fundamental market structure has changed materially, my expectation is that this episode will ultimately be remembered as another cyclical setback rather than a turning point for systematic strategies."

-Jules Rimmer

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