Lessons From Over a Decade of Managing Money Using Quant Strategies

By Jack Forehand — When we started managing money, I used to focus on what I knew. Today, after over 12 years doing it, I have learned it is best to focus on what I don’t know because no matter how much you learn in this business, what you don’t know will always far exceed what you do. Looking back on everything I’ve learned, I’m pleased to say that the principles I initially believed have proven to be mostly correct. These include; following factor-based strategies with strong historical track records, focusing on the long-term and eliminating emotion from the investing […]

New Quants Are Focusing on Artificial Intelligence

There is a new breed of “quants” that are looking to disrupt the industry using artificial intelligence (AI), according to a recent article in Institutional Investor. One such fund is Numerai, started by 30 year-old South African Richard Craib, who thinks AI will “lower the cost of fund management, producing savings that can be passed on to institutional and retail investors.” While typical quantitative investment firms use people to build systematic strategies, Craib and his firm Numerai “intends to teach machines how to do that,” according to the article. Renee Yao, a Ph.D. in math and statistics, founded statistical arbitrage […]

There’s One Investing Edge Left – And Anyone Can Capitalize On It

By Jack M. Forehand —  “In investing, what is comfortable is rarely profitable.” – Rob Arnott Wall Street has become an incredibly difficult place for anyone to get an edge. With technology taking over the market, any small mispricing is typically corrected very quickly. And talent within the industry is also as good as it ever has been. Over 17,000 people were awarded CFA charters following the most recent exam. That is more than double what it was 10 years ago and triple what it was 20 years ago. The result is that outperforming the market has become incredibly difficult. […]

A Practical Approach to Quant Investing

By Jack M. Forehand — This is the first post in a new series we will feature on the Guru Investor that will take an in depth look at quantitative and rules-based investing, and models and strategies that work in the market over the long-term. At Validea, we have been running rules based strategies since 2003 and over the years, we have learned many things about what works, what doesn’t, and how to interpret it all from the perspective of a long-term investor. I will share those insights in this new blog column. Before we begin, it is important to […]

Finding Your Edge a Key to Investing Success

By John P. Reese The mathematician Ed Thorp figured out how to beat Las Vegas casinos at blackjack and baccarat and they didn’t like it. But the MIT and University of California Irvine professor didn’t get discouraged. He applied those same mathematical principles to the markets, and also won. Mr. Thorp knows that good ideas have limited runs. As more investors pile into a winning trade, the returns start to diminish and the idea can no longer outperform the market. During a recent Bloomberg interview with Barry Ritholtz, Mr. Thorp discusses this phenomenon in the context of Berkshire Hathaway, whose […]