Zhejiang High-Flyer Asset Management, which operates China’s largest algorithm-based hedge fund, apologized for record losses, highlighting the industry’s breakneck growth and crowded trades as the main drivers.
Hangzhou-based Zhejiang High-Flyer Asset Management said it was «deeply guilty» for the losses which were not specified, according to a statement on its social media account.
The statement also notes that assets have dropped notably and while the majority of its clients made gains, some saw losses on papers and returns underperformed relative to the index.
AI Risk
According to High-Flyer, its artificial intelligence didn’t time trades sufficiently well – though selection of stocks was in line with long-term value – and attributed the failure to the crowded trades caused by the expansion of other algo-driven firms seeking similar trades.
High-Flyer’s algorithm increases risk to seek higher returns when volatility rises which in this case worsened losses, the statement added.
At around 90 billion yuan ($14.1 billion) in assets under management, High-Fyler is the largest quant hedge fund in China.
