"It instructs the team to sell when losses become sizable, regardless of what its mathematical models say, according to a person with direct knowledge of the matter."
Hard to blame the robots then.
Hard to blame the robots then.
"The market can stay irrational longer than you can stay solvent" -JMK
Also, they tend to mess with your mind (loss-aversion psychology, deep feeling of pain at losses) and make you exit and enter the trade multiple times, adding up to transaction costs, too.
All in all, a) Buy and Hold may actually be quite sensible and b) stop-losses are actually much more complicated than you'd think and seem to be a mathematical rabbit hole.
Stop-losses may make sense in, say, an intraday pair-trading strategy where an analysis of past return evolution clearly shows that winners keep winning and losers are hopeless beyond a point.
I'm especially surprised it's used in a model like this. Most quant funds use some type of portfolio risk management to allocate capital toward bets that with the highest expected return while controlling overall risk. That losing stock may be offsetting other risks in the portfolio.
As I mentioned in my other comment, a stop-loss is a very crude approach to risk management. It will help control the middle of your left tail, but the far left tail extreme events cannot be protected against by such a rule.
They've got some pretty good arguments in favor of this, too: https://vanguardblog.com/2016/10/13/when-nothing-is-somethin...
They do a great job with VTI and their other funds to attempt to minimize the requirement of actually selling assets when liquidation requests come in, but that's not the same as saying that they, Vanguard (and more accurately the fund managers), practice a "Buy and Hold" strategy. Tracking an index well actually requires lots of buying and selling!
Venture captialists' strategy involves mostly taking sizable losses, but with enough breakout successes to still make money in the aggregate.
Remember it's trading, not longterm investing.