Schumpeter's waves applied to Quant Funds

Brief Systematic Funds Market Analysis

Overcrowded effect:

Because Quant Hedge Funds have similar trades, during a market turmoil when Investors deleverage, unwinding their position exacerbates the market sell off with volatility spikes and huge drawdown.
Since our Investment Process is different, our returns are uncorrelated to most of Quant strategies.
We provide real diversification by construction.

excerpts from: http://www.quantnet.com/steve-shreve-on-pablo-triana

• "A lesson that can be learned from the 2008 crisis is that if everyone implements the same good idea, their collective action can invalidate the assumptions that made the idea good. "

• "A feature of the most recent bubble is that quantitative analysis contributed to a false sense of security that encouraged firms to scale up risks. In some cases senior managers and even quants themselves did not appreciate the limitations in the models on which they based their risk analysis."