Quant funds are having a strong turnaround, and here are their top new bets

Published Sat, Aug 21 20218:32 AM EDT

Quant funds are having a revival in 2021 after years of underperformance thanks to the strong rally in beaten-down value stocks. A number of them piled into the same names to ride on the economic rebound. Quantitative equity funds have outperformed their benchmarks by 1.4% on average this year, beating fundamental managers and long short hedge funds, according to data from Bernstein. "Quants have no doubt been helped by the Value rally that started in November 2020, the performance index shows this as the starting point of the strong run this year," Sarah McCarthy, global quant research analyst at Bernstein, said in a note. "December 2019 marked the trough for quant performance." Quant funds buy and sell securities based on algorithmic models and quantitative analysis. Their trading signals usually come from economic data points and company-specific news, while their algorithms could also be build around different styles like momentum, quality and value. CNBC PRO used Symmetric.io , a hedge fund tracking and ranking firm, to find the top new holdings from more than 50 quant funds at the end of the second quarter. These funds include AQR, D.E. Shaw, Renaissance and Two Sigma. A number of systematic players flocked to Caterpillar during the second quarter with new flows worth an aggregate of $32 billion, the data showed. The heavy equipment maker, considered an industrial barometer, has benefited from the economic reopening. The stock is up 12.5% this year. To be sure, due to their fast-moving nature, these positions could have changed since the end of the quarter. Many quant funds also added stakes in Airbnb last quarter. In the second quarter, Airbnb beat Wall Street's expectations for revenue and bookings, but the company warned about expected volatility from the Covid delta variant. Chinese internet stocks Baidu and JD.com also made the list of top new bets among quant funds in the second quarter. It's unknown if these funds exited these positions more recently as Chinese government crackdown on the tech industry escalated. They also built positions in Electric car maker Nio and Ulta Beauty during the period.

A trader works on the trading floor at the New York Stock Exchange (NYSE) in New York, August 9, 2021.

Andrew Kelly | Reuters