QFS Shutting Down Currency Hedge Fund

QFS Asset Management is shutting down its currency hedge fund citing difficult market conditions.

QFS’ exit thus makes it the latest casualty of increasingly treacherous foreign-exchange markets.

Michael Mauboussin: Here’s what active managers can do

michael mauboussin, Credit Suisse, valuation and portfolio positioning, capital markets theory, competitive strategy analysis, decision making, skill versus luck, value investing, Legg Mason, The Success Equation, Think Twice: Harnessing the Power of Counterintuition, analysts, behavioral finance, More Than You Know: Finding Financial Wisdom in Unconventional Places, academics , valuewalkThe debate over active versus passive management continues as trends show the ongoing shift from active into passive funds. Q2 2020 hedge fund letters, conferences and more At the Morningstar Investment Conference, Michael Mauboussin of Counterpoint Global argued that the rise of index funds has made it more difficult to be an active manager. Drawing Read More

Currency-only hedge funds wrapping up

Last year, FX Concepts, founded by John Taylor, announced that it was closing shop. The fund has lost 15% last year, and has suffered through a succession of bad years which have plummeted its asset base from $12 billion in 2009 to $661 million in 2013. The flagship FX Global Currency Program has lost 3.11% in 2012, and was down 14.5% in 2011.

The Greenwich, Connecticut-based QFS Asset Management was founded by economist Sandy Grossman. He indicated in a news release on Tuesday that it will return nearly $1 billion to clients by the end of the month. At its heyday just before the financial crisis, QFS oversaw $3.6 billion in assets. However, people familiar with the fund said QFS assets have shrunk despite some strong returns.

Tough market environment

QFS chief executive officer Karlheinz Muhr said in a statement: “The current market environment doesn’t offer adequate risk adjusted opportunities for fundamentally-driven quant macro strategies, and that is unlikely to change for the foreseeable future”.

Karlheinz Muhr attributed QFS’s poor performance to the unconventional monetary policies of global central banks, such as the Federal Reserve’s quantitative-easing program, which he said ‘distorted’ asset prices and made it difficult for currency funds to make money.

QFS has lost money in two consecutive years

QFS’ closure announcement comes after its currency program lost 8.7% in 2013 and 8.6% in 2012, the first time in at least 20 years that QFS has lost money in two consecutive years. QFS will return all money to clients, which include pension funds, sovereign-wealth funds and other institutions. The currency program was the firm’s last remaining hedge fund, after it had closed its global macro and fixed income hedge funds in December 2012 due to poor returns. The firm reported positive annual results for its flagship fund between 2007 and 2011, particularly throughout the financial crisis.

Flurry of shutdowns

FX Concepts, one of the world’s largest currency-focused hedge funds, filed for bankruptcy last year citing central bank intervention as a reason for poor returns.

Another big hedge fund of the past, Clive Capital, decided to shut down business last year after a particularly rough year for commodity traders. Another quant fund, Sweden-based Density indicated that it was shutting down several tough quarters. Michael Karsch’s Karsch Capital, a long/short equity hedge fund, also intimated to investors last year that it was closing shop.