Investors Looking to Quants for Fund Management Muscle

As hedge fund managers continue to grapple with losing dissatisfied clients, those funds more highly-focused on a computer-driven approach (so-called “quantitative” hedge funds) are standing out, the Financial Times reports. According to FT, the flow of investor funds into the “quant” sector have more than doubled since 2009 (from $408 billion to nearly $880 billion). Several large hedge funds are increasing investments in quant strategies “as they search for new—and potentially more reliable—ways to produce returns.” Tony James, chief operating officer of Blackstone, was quoted as saying, “Frankly, we expect to see assets move from human managers to machine managers.” Paloma […]

Build a Real Portfolio Using Stock Screens

The advent of stock screening software has made it possible for investors to search using any number of metrics, but that’s only part of building a successful investment portfolio. This complex process is the subject of an article by John Reese, founder of Validea Capital Management LLC., in the July issue of The American Association of Individual Investors Journal. Reese asserts that, while stock screening models are a helpful tool, they don’t provide all the information an investor needs. Here is a summary of his guidelines: Choose a Screen You Believe in: With the myriad stock screens available, you should […]

Coming to Your Doorstep: Automated Investment Management

“Humans aren’t going to be completely replaced, but they will be mostly replaced,” says Sudhir Nanda, head of T. Rowe’s dedicated “quantitative management” arm. In a Financial Times article earlier this year Nanda, who manages T. Rowe’s Diversified Small-Cap Growth Fund, predicted that the traditional management industry will become increasingly technology driven. He is not the first to turn his attention to this trend. Many asset managers (BlackRock and Goldman Sachs Asset Management included) are dedicating resources to new technology in an effort to stay current in the keenly competitive world of investing. Andrew Haldane, the Bank of England’s chief […]

Fundamentally Sound Stocks Win When Recessions Loom

Whether it’s interest rate hikes or China’s slump or US weakness, investors have found a myriad of economic reasons to worry in 2016 — and they’ve expressed their worries by pulling billions of dollars out of stocks. But in his latest for Canada’s Globe and Mail, Validea CEO John P. Reese highlights some new research showing that the best time to beat the market is when economic times are tough. “The research comes from O’Shaughnessy Asset Management (OSAM), which is headed by quantitative investing guru James O’Shaughnessy,” Reese writes. “The group invests using a number of ‘factors’ — that is, […]

When Should You Rebalance?

Like many quantitative investors, Validea CEO John P. Reese uses a strict rebalancing approach to portfolio management. But just how often should you rebalance your portfolio? Reese says it may depend on the type of strategy you are using. “Rebalancing forces a disciplined buy/sell methodology into the investment process, removing emotions and biases that oftentimes hurt performance,” Reese writes in his latest column for Canada’s Globe and Mail. “Ben Graham – the man known as the ‘father of value investing’ – would have considered rebalancing (even on an annual basis) speculative in nature, but when a stock’s fundamentals change and […]