Obviously, strategies like "short everything" did well during this period, but getting the future right is one thing and having a robust strategy is another.

In particular, many quantitative strategies rely on a lot of statistical and historical assumptions. The line usually goes "well of course they're wrong but they work". But during 2008, many did not.

What quantitative strategies and approaches were successful through 2008, and why?

  • $\begingroup$ Are you asking which factor exposures performed well during the 2008 crisis for equity portfolios? Or are you asking for some other type of "strategy" as in a portfolio construction technique, or a trading strategy? $\endgroup$ Commented Jan 2, 2012 at 15:45
  • $\begingroup$ Mostly the latter. Though I would also be interested to know how those successful techniques led to good factor exposures without someone sitting down at some point and thinking "Commodities are going to crash" or "housing is in for a downturn". $\endgroup$
    – Elliot JJ
    Commented Jan 2, 2012 at 17:43
  • $\begingroup$ Well the question is a bit open-ended, but generally shorting the leverage factor, small caps, and financial sector exposures and going long US treasuries and non-financial investment grade debt worked well. On a relative basis high-quality growth stocks did better $\endgroup$ Commented Jan 2, 2012 at 22:26

2 Answers 2


One simple way to approach this question is to look at what quantitative hedge funds did well during the crisis, and try to understand what strategies they employed. As an example, you can look at the Barron's 100 from 2009. The top performing fund was RenTech's Medallion. Their strategy is not publicly known.

There were only two broad hedge fund strategies that did well: short-bias and managed futures. Many Global Macro firms also performed well (e.g. Soros), although they are less coherent as a category (and are typically not strictly quant). Short-bias did well because this category must stay net short equities; as a category, this isn't primarily associated with quantitative strategies. Managed futures is the largest systematic category that performed very well during the crisis. This strategy is associated with trend following in the futures markets. You can see many of the largest managed futures funds in the Barron's list, including BlueCrest, Graham, and Two Sigma.

Another category that performed quite well during the crisis is short-term systematic traders, including high-frequency traders. There are several examples in the Barron's 100 as well, such as QIM and Roy Niederhoffer (also have a look at the performance of the "Short-Term Traders Index").

Most of these general categories have not performed as well since the crisis, which is why they are often viewed as hedges (insurance) more than absolute return funds.

  • $\begingroup$ @Elliot Jans you might also consider looking at the strategies that did not do well i.e. which firms blew up. $\endgroup$
    – strimp099
    Commented Jan 3, 2012 at 3:27

There are hedge funds out there that actually only make money when markets go down a lot. I think the strategies they use are what you are looking for and i must tell you i found it very interesting. There is this hedge fund called Universa, its run by Mark Spitznagel and advised by Nasim Tallib the writer of the book "the Black Swan". This hedge fund profits out of black swan events like the 2008 crash where he made a 100% return. Spitznagel looks at the probability of the market falling for a certain percentage under several conditions, in his latest paper he looked at the Q ratio. what he did is he looked at the Q-ratio of the S&P500 companies in the last 110 years and for specific ranges of Q-ratios he looked at the left tail of the distribution of returns. he concluded the paper with a median and 20th percentile (99% conf. int.) return drawback of the S&P500 for the next three years. Here is the paper: http://www.universa.net/UniversaSpitznagel_research_20110613.pdf


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