NYHFR Survey: Quant Strategies Currently More Appealing Than Fundamental Ones

Jul 19 2017 | 11:07pm ET

Quantitative investment strategies, fueled by big data, increasingly sophisticated algorithms and efficient technologies, are currently more appealing to alternative investors than traditional fundamental ones, according to a new survey by the New York Hedge Fund Roundtable (NYHFR). 

The topic of quant versus fundamental was the topic at NYHFR’s June event, during which members had the opportunity to weigh in, as well as through an online electronic poll.

“Figuring out the right way to hedge is pretty tricky and that’s what the computer does well,” said George Hall, CEO and CIO of $2.9 billion hedge fund manager The Clinton Group, to attendees during the event. “In our view, the quant model is really good at making a lot of bets and identifying attractive stocks… the goal of quant investing is to use statistics and mathematics to get there a little bit faster than the fundamental guys,” he said.

Results of the survey were unequivocal: 92% of Roundtable members surveyed said quantitative investing is currently more appealing than fundamental investing. 

Other key findings of the NYHFR survey:

  • Asked whether they believe quantitative and fundamental investing can successfully work together, 91% of respondents said that they believe they can, while 9% do not think it is possible.
  • 89% believe big data should have an influence on quantitative investing. 
  • Given unpredictable political climates around the world, respondents were asked whether they believe a quantitative investment approach is appropriate right now or whether investors should steer away from quant funds. 69% of respondents believe that quantitative funds will do well and can handle the unpredictable climate; 22% think that quantitative investing is too heavily reliant on historical trends, and 8% think it would be too difficult for quantitative funds to successfully navigate a quant strategy in the current political climate.
  • When asked whether investors’ preference for either quantitative or fundamental investing is based more on the fees tied to each of these strategies, or the strategies themselves, 70% of respondents said that while fees are important, investors ultimately still care more about the potential returns of the strategies they choose, while 30% of respondents think that fees are driving the strategies investors currently favor.

Of the respondents to the survey, 24% were fund managers, 18% were allocators, 14% were engaged in risk management or trading, 27% were service providers, and 17% were other industry participants.

“Quantitative investing has become extremely attractive to investors because of its ability to mine massive amounts of data and to identify patterns that aren’t necessarily as evident to the human mind,” said Adam Weinstein, president of the New York Hedge Fund Roundtable and a managing director at an alternative asset management firm. “As software programs become more and more sophisticated, quantitative funds are able to rapidly identify everything from anomalies in the market, to correlations between equities and everything from commodities to the outcome of political races.”

The New York Hedge Fund Roundtable is a non-profit organization focused on promoting ethics and best practices within the alternative investment industry. The membership consists of investors, fund managers and other industry professionals who regularly meet to discuss current issues within the industry and connect with peers.

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