The New Math

March 27, 2008   Nick Rockel

Smarting from last summer’s huge losses, quantitative hedge funds are pressing into new realms of science in an effort to prosper during the ongoing credit crisis.

For a man whose flagship hedge fund is running on fumes, Marek Fludzinski couldn’t be calmer. The founder and CEO of New York–based Thales Fund Management has watched his firm’s assets plummet by more than $1 billion during the past year, as Thales, like most quantitative managers, has suffered as a result of the global credit crisis that began last summer. But Fludzinski, who has a Ph.D. in theoretical physics from Princeton University and was one of the first two dozen employees at famed quant shop D.E. Shaw Group, is on a mission that means far more to him than profit and loss. He believes science is the key to unlocking the inner workings of the markets, and he intends to devote significant resources to prove it.

“I think there is a law tying everything together,” says Fludzinski, 52.

Science, however, didn’t much help Fludzinski last summer, when the onset...

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