Goldman’s Rebuilt Quant Approach

When quantitative equity funds experienced a meltdown ten years ago, Goldman Sachs (among the hardest hit) “began to rebuild the strategies with less leverage and more diversity,” according to a recent Bloomberg article. “A decade later,” the article says, “the quant unit has clawed itself back to respectability,” and now manages about $110 billion. But the team faces stiff competition, “with almost every asset manager chasing quant money, betting on similar factors and shaving fees on exchange-traded funds to near-zero.” The article explains that the Goldman unit now “uses leverage in only some offerings and monitors markets for signs that […]

Jason Zweig: Use Simple Tests Before Investing in a Quant Fund

In a recent article for the Wall Street Journal, Jason Zweig offers some tips on how an investor can devise his own quant strategy. “Perhaps it is cheaper to learn from the quants than to hire them,” he argues. Zweig shares findings of a Duke University group of researchers that found, during the period from 1996 to 2014, “systematic funds (which describe themselves with such words as ‘algorithmic’, ‘computer-driven’, or ‘statistical’) performed about the same as traditional ‘discretionary’ funds that claim to use human judgement to pick holdings.” The complex algorithms used by many of Wall Street’s quants, Zweig suggests, […]

Quant Strategies Are Not Magic

 The flow of funds into the quant investment strategies continues but, like most new ideas, this one doesn’t come without caveats, writes Validea CEO John Reese in a recent Forbes article. Reese argues how quant strategies shouldn’t be considered a magic bullet, but rather a tool to thwart an emotional approach to investing. He underscores the advantage of the type of blended approach used by Validea, and identifies the following picks identified using his stock screening models: Accenture PLC (ACN) provides management and technology consulting services. The company earns high marks for its predictable and stable earnings-per-share as well as […]

Stock-Pickers Beware: Bots Are Here

BlackRock’s March announcement that the firm had reduced its staff of stock pickers to increase its focus on quant strategies may support the consensus that “active management is dying,” but Bloomberg columnist Nir Kaissar argues that “the problem is not that active managers fail to outperform the market; it’s that they keep that outperformance for themselves through high fees.” “Smart beta” index funds, on the other hand, have been able to beat the market at very low-cost to the investor. Kaissar offers data (provided by Dartmouth professor Kenneth French) showing that a “simple quantitative strategy” could have generated the same […]

Twitter and the Fed

Research shows that trading strategies built around tweets in the days preceding Fed meetings have been profitable, writes Steve Russolillo in this week’s The Wall Street Journal. As the use of quantitative investment strategies continues to rise, social-media platforms such as Twitter have become popular sources of intel to gauge investor sentiment, says Russolillo, referring to the frequency and impact of the president elect’s tweets since the election. A study conducted by Andrew Lo, a finance professor at MIT’s Sloan School of Management, and Ph.D. student Pablo Azar analyzed 3.9 million Fed-related tweets from 2007 through 2014 and assigned scores […]