Photograph by Tariq Dajani/Gallery Stock
Does Not Compute
With quant funds, computer algorithms are used to determine whether an investment is good or not. But these quantitative analysis models are built by humans, some of whom make mistakes. Such was the case at Axa Rosenberg Group, which had a coding error in its investment model that cost clients $217 million in losses. The firm agreed to pay $242 million to resolve claims by the Securities and Exchange Commission. Axa's co-founder, Barr M. Rosenberg, also agreed to pay $2.5 million to settle claims with the SEC, which accused him of securities fraud for concealing the glitch in 2009. In settling, Rosenberg neither admitted or denied the charges.