Volatility quants threaten US$170bil selling spree

Big sell-off: Traders work on the floor of the New York Stock Exchange. All three major indexes closed with significant losses on Monday, amid a warning that comes on the heels of volatility-controlled products offloading US$103bil worth of US shares. — AFP

NEW YORK: Systematic funds have offloaded more than US$130bil of global stock bets in recent weeks. Now these rules-based players threaten to take their selling to a whole new level as volatility spikes.

Strategies including risk parity, vol-targeting and trend following will dispose US$70bil to US$80bil of shares, with at least US$90bil more to unwind over the next four sessions, according to estimates from Morgan Stanley’s trading team.