Investing
A Once-Reliable Trade Is Becoming So Popular It May Be Falling Apart
- Index-rebalancing strategies lose luster as performance wilts
- Hedge funds from Balyasny to Millennium are in the trade
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One of the most reliable strategies in the hedge-fund world this century is also one of the simplest: Buy stocks that are entering major indexes and sell those that are exiting them. For Emmanuel Terraz, it has minted profits practically his whole career.
But something is changing, and the Frenchman’s Candriam Index Arbitrage fund — which has gained in all but four of its 19 years, including through the financial crisis and Covid — posted its worst-ever performance in 2022.