Economist – If something has not worked for five years, most people would conclude that it was broken. Tell that to the geeks managing \u201cquant\u201d hedge funds, who craft elaborate algorithms to profit from market movements. Once money-spinners, their prized formulae have misfired since 2009, losing money in four of the past five years. Unless their results improve markedly, the giant funds will finish this year as the worst-performing of the most common hedge-fund strategies.<\/p>\n
\u201cTrend-following\u201d involves programming computers to analyse market movements and try to infer where they might go next. Practitioners speak with reverence of \u201ccrossover levels\u201d and \u201cmomentum speeds\u201d leading to \u201cbreakout points\u201d. A rough translation is that a trend that lasts a few days or weeks can profitably be invested in until it reverses, at which point a new trend may already be forming. Whether the markets are going up or down does not matter. Nor does the underlying asset being analysed\u2014typically a futures contract linked to a commodity or a security.<\/p>\n