Layoffs hit at pair of hedge funds
Some of Connecticut’s largest investment firms have kicked off 2020 by making significant job cuts — paralleling a trend that also surfaced at the start of 2019.
Layoffs at Greenwich-based AQR Capital Management and WorldQuant highlight a challenging period for the industry in which a number of asset managers are struggling to match their results in previous years and keep up with the surging returns of major stock indices.
“There is a less robust environment for these investment firms than there was a few years ago,” said Lawrence J. White, a professor of economics at New York University.
“There are still smart people running these firms, but these firms do not have the same luster that they once did.”
Significant reductions
AQR confirmed this week that it was laying off between 5 percent and 10 per
cent of its global workforce.
The firm declined to specify the downsizing’s effect on offices including its downtown Greenwich headquarters, but it appears to be cutting at least severaldozen jobs. At the end of last year, AQR had employed about 900 worldwide.
About a year ago, AQR had reduced its headcount by a low single-digit percentage.
“After conducting our annual review, we made the difficult decision to reduce headcount to balance the size of our workforce with the current needs of our clients,” AQR Principal and Chief Marketing Officer Suzanne Escousse said in a statement this week. “We remain committed to our investment philosophy, process and strategies and believe that today’s action contributes to the long-term health and strength of our business.”
The job losses likely reflect a recent drop in assets and disappointing results in key areas.
In their largest decrease in the past few years, AQR’s assets fell by nearly 20 percent, to $185 billion, in the year ending September 2019, according to Bloomberg.
The quantitative-investment firm — which relies on advanced quantitative analysis and also operates as one of the largest hedge fund managers — also faced headwinds in 2018, when most of its mutual funds did not yield positive returns.
Another Greenwich quantitative-investment firm, WorldQuant, has recently cut about 130 jobs and is closing five offices overseas, according to Bloomberg. The closings are taking place in Mexico City; Talinn, Estonia; Bucharest, Romania; Sofia, Bulgaria; and Bangkok, Thailand.
Before the layoffs, WorldQuant employed more than 750 across 29 offices in 18 countries, according to its website.
The firm was still producing a positive
return, but it marked a decline from earlier years, Bloomberg reported.
WorldQuant declined to comment for this article.
Fluctuating performance
Among other cornerstone Connecticutbased investment firms that do not appear to have recently made layoffs, results have varied in the past year.
At Westport-based Bridgewater Associates, the world’s largest hedge fund by assets under management, the flagship All Weather Fund returned nearly 17 percent, while another flagship fund, Pure Alpha, was essentially flat, according to sources familiar with the matter.
In 2018, All Weather yielded a loss of about 5 percent and Pure Alpha returned nearly 15 percent.
In contrast, Stamford-based Point72 Asset Management posted a 13 percent return through the end of November, according to the New York Post. It had returned less than 1 percent in 2018.
Overall, U.S. hedge funds produced last year an average gain of 12.76 percent, according to financial-services data firm Preqin. They recorded, on average, a loss of 0.09 percent in 2018 and a return of about 11 percent in 2017.
In comparison, the S&P 500 stock index finished 2019 with a total return, including dividends, of 31.5 percent. The Nasdaq composite grew about 35 percent.
Those numbers marked the best annual performance for the two indices since 2013.
“The general stock market has been doing very well,” White said. “If somebody invested in a low-cost S&P 500-type of mutual fund or exchange-traded fund, he or she would have done quite well. Better than having invested with a managed mutual fund and, I think, better on average than if he or she invested with a hedge fund.”