December 13, 2022

Quantitative Strategies: what to expect

Quantitative investment strategies are not only at the core of our business, but also the direction we believe the Investment and Asset Management industries will take in the future, as the adoption of systematic investment techniques is still in its early stages of development.

While it remains true that most of the assets are managed from discretionary Portfolio Managers, the rise of Quants has brought additional opportunities to all investors on the market. And while often systematic funds have been considered underperforming discretionary funds, or it is argued that the previous can only successfully invest in well-known systematic risk factors with little added value, there is no empirical evidence that the contrary holds.

There are many reasons to believe that quantitative investment strategies will improve:

  1. Technological advancements. Quantum computing is probably the most interesting technology, but generally speaking, computing power and technology infrastructure can only progress, while it is hard to see similar progresses to discretionary trading.
  2. Data. The data revolution already started: many systematic investment companies are looking for additional data sources and providers, alternative strategies and improving their pipelines. This clearly gives much more advantage to systematic investments, rather than discretionary ones, as machines can digest data much better than humans (in terms of both speed and errors).
  3. Democratization of investment and trading. What years ago looked like complicated, unclear matter, only relevant to major players in Wall Street, is now common knowledge for many. This improves not only the knowledge, but also the crowd who might be interested in something they could not achieve by themselves. And of course, this will benefit discretionary investors, but also the systematic counterpart, as quant strategies are becoming more popular and demanded, especially from institutional investors.
  4. Skills. The target of many students and future professional has become to code, understand the math and invest using models. This can only benefit the world of investments, as the technical knowledge is becoming more and more widespread.

It is not all gold that glitters. Not all investment strategies are the same, and no quant company is the same. There are some challenges ahead for the quant world, as it must improve the way it consumes data, the speed of calculation for machine learning models, the research process and backtest overfitting. Some suggestions from the best practitioners always help. What is mostly needed in quantitative investment management, and is often missing in individual traders, is an investment process and framework to identify strategies. Nevertheless, the opportunity is massive and the brightest minds are already at work to provide investors with consistent results.

The right time to learn and use systematic investment strategies is now. The paradigm is changing, and Unbiased Alpha is part of it.

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