Computer models at Renaissance Technologies, the firm founded by the mathematician and former codebreaker, misfired when volatility surged this year, contributing to a first-quarter loss at its largest hedge fund. The beta models, which help determine portfolio exposure at funds for outside investors, “in recent volatile markets have not performed as expected,” Renaissance said in a March 30 filing.

The setback for one of the industry’s best known hedge funds is another example of the turmoil wrought by the coronavirus. The pandemic has stalled global commerce, ended a record bull run for stocks and forced the Federal Reserve into an unprecedented multi trillion-dollar rescue of financial markets.

Renaissance’s Institutional Equities Fund suffered a similar blow in 2007, when the subprime mortgage crisis stung quantitative firms, spurring them to sell assets at fire-sale prices to reduce leverage and stanch losses. Back then, the quant models were confounded by events they hadn’t seen before:widening credit spreads amid a plunge in housing prices. This time, theshock is a pandemic that shut large swaths of the economy in a matter of weeks.

“Renaissance isn’t magic,” said Nick Patterson, a former executive at the money-management firm who works as a senior computational biologist at the Broad Institute of MIT and Harvard. “If Martians invade, they haven’t got a model for Martians invading.” […]