... Consider the following asset gathering entropy as well:
“BlackRock estimates that there are $1.9tn of assets in dedicated factor strategies and predicts this will swell to $3.4tn by 2022.” (SOURCE)
Obviously, quant behemoths AQR and RenTech are included in that calculus. It’s unclear, however, whether or not BlackRock includes the $100-200 billion in AUM at multi-manager, largely market-neutral (or some version of that) hedge funds in their calculus given their daily need to delta hedge factor exposure risk.
Regardless, we are all aware of the large quantity of leverage such strategies employ and how their decisions to gross up/down sectors and style factors contributes to market volatility – the same volatility you’ve seen on your screen throughout this #Quad4 “hurricane”.