Last month, Moore Capital Management, one of the most sophisticated hedge funds in the world, decided to return US$2 billion to investors because in the previous two years it had barely made any money at all.

In fact, an investment of US$1000 at the beginning of 2010 would have made you just over $40.

The reason for these meagre returns can be found in the unpredictable investment markets, where fundamentals no longer matter and an entire month's returns can be given back in a matter of minutes over a politician's statement, or lack thereof.

Macro and political factors drive the current markets, and although Moore Capital is a global macro fund, they are not the sort of macro factors that make managers money.

"While it is true that the current climate is macro driven, it is the wrong type of macro," BT Investment Management head of macro strategies Joe Bracken says.

"If your macro driver was something like the price of oil, or risk premium, that is something you can understand, something that can be modelled, something that can be predicted to a certain extent.

"Unfortunately, markets over the last two years, at least from a macro side, have been driven by noise, which is completely unpredictable."

Bracken describes how up to August this year, Germany seemed like a pretty stable country, but then panic took over and the market dropped 30 per cent, a drop unsupported by fundamentals.

But it is not just quantitative funds that have struggled to outperform.

Earlier in September, Australian wealth management firm Pengana closed its Asian equities fund, as uncertainty in the markets caused prices to divert greatly from their underlying value, complicating the team's fundamental analysis.

Advance Emerging Capital chief executive Slim Feriani says the story is not uncommon in emerging markets.

"2011 was a much tougher year than 2010, but put together from end of 2007 onwards, it has become a very challenging environment for investment managers and stock pickers globally, and it has been a very difficult environment for alpha generation," Feriani says.

"I'm not surprised to hear that some people have just given up.

"It is reflective of the fact that over the last five years the cross asset correlations are at all-time highs. We have never been in this territory.

"There is a 0.9 correlation across all asset classes; equities, bonds, commodities, property, hedge funds, everything moves in the same direction. It makes it frustrating for alpha generation, but we would like to think that mean reversion will prevail."

He says the underlying growth story of the emerging markets is far from played out yet.

"It still has a long way to go. The urbanisation level is nowhere near where these countries are going to be in 20 years' time. That [trend] is irreversible. They are not going to go backwards; people are not going to go back and live in rural areas," he says.

"Therefore the middle class will keep growing, consumption will keep growing and that will drive the world economy in 10 to 20 years' time; it is the emerging market consumer. They are still in growth mode."

But in the meantime, uncertainty rules the markets.

The problem with uncertainty is that, unlike volatility, you can't model it; uncertainty does not come in standard deviations.

But Bracken says there are some measures managers can take to adjust to these conditions.

"Within our processes and particularly on the equity side where it has been very volatile indeed, we have taken a process that we've already had and made it much more high frequency," he says.

"Given that the market is turning over much more rapidly, we should then have a more high-frequency approach in at least one of our investment strategies, and that seems to be working fairly well."

Bracken also continues to refine the quantitative indicators he uses and occasionally adds new ones to the basket.

"We have a basket of quantitative indicators and it is true that some of them become less important over time, some become more important," he says.

"We looked for example at the variance risk premium, which is a risk signal in the market. It is all relatively new, but it seems to work relatively well at identifying risk in a particular market, whereas say five years ago we didn't use it at all.

"The quantitative signals are not less reliable, but you always do work to improve them."

But Standard Life Investments head of global equities Mikhail Zverev says that for investors with a long-term horizon, the distorting effect of uncertainty provides opportunities in the long run.

In the current environment, markets are often less willing to differentiate between specific companies, preferring to trade stocks as if their underlying fundamentals are almost identical, Zverev argues.

"During periods of volatility, stock pickers can build positions in stocks they like for company-specific reasons, at prices less reflective of their underlying fundamentals," he says.

"For example, Australian-listed mining firm Iluka Resources belongs to the minerals sector, which performed poorly as the market shunned cyclical stocks in 2011.

"There were concerns about China's economic slowdown, however, Iluka's stock-specific factors more than offset these sector headwinds.

"Changing supply/demand balance, increasing pricing and the company's superior resource position resulted in a string of strong results and market updates, which ultimately drove shares up 73 per cent on an absolute basis, substantially outperforming the MSCI World Index.

"This demonstrates that even in macro-driven markets and in out-of-favour sectors, when companies deliver strong fundamentals, the stockholder is rewarded."

According to Zverev, the opportunities are even bigger in global equities.

"There are thousands of investable companies, with enormous diversity of business models and individual circumstances that should present plenty of opportunities," he says.

But he admits consistently identifying and acting on those remains a challenge.

"We believe good fundamental analysis requires a combination of scale and effective sharing of global investment insights, along with high-quality company access," he says.

"Despite all its limitations, an in-depth conversation with the top management of a company, its customers, suppliers and competitors is still the best source of information for a stock picker."