Firms that build models from the same information end up in the same trades, says LMAX Group’s head of data
While individual quantitative investors often dismiss the impact of crowded trades on their own returns, a recent survey reveals a starkly different outlook for the industry as a whole. Conducted by LMAX Group, S&P Global, and Mistral, the survey of systematic and quantitative firms found that only one in ten named crowding as a leading pressure on their performance, with a mere 4% identifying it as their biggest challenge over the next three years. However, when assessing the broader market landscape, 85% of respondents expressed at least moderate concern that the industry is becoming dangerously reliant on the same models, signals, and underlying data, creating a potential source of systemic vulnerability.