Robots Won’t Replace the Fundamental Investor

A new study by McKinsey says that traditional asset managers are using advanced analytics to build better decision-making capabilities rather than to replace human portfolio managers. This according to an article in Institutional Investor. “That means using data science to pinpoint and correct the mistakes investors are making and to focus portfolio managers on problems that only humans can solve,” the article explains, adding, “That’s in contrast to five years ago, when most traditional managers… Read More

Replicating Buffett’s Wide Moat Investing Method

By Justin J. Carbonneau (@jjcarbonneau) —  Warren Buffett and others have long advocated buying companies with moats around their businesses. Strong brand loyalty (Disney), economies of scale (Walmart), innovation (Google), location (Starbucks) and other sources of competitive advantage play an important role in in the success of companies over time. The reason companies with moats appeal as attractive investments is that a moat, which is a function of a firm’s competitive advantage, protects the business… Read More

Lessons from a Quantitative Investing Conference – Part Deux

By Jack Forehand (@practicalquant) Last week, I had the privilege of attending Alpha Architect’s annual Democratize Quant conference for the second time. The conference brings together leaders in the fields of quantitative investing and asset management to talk about the state of the business, and to share ideas to help all of us learn and improve our investment approaches. Given how good last year’s conference was (my summary of that is here), they were going… Read More

Marko Kolanovic Says Quant Investing Has Limits

An article in Bloomberg last month profiled an interview with JPMorgan Chase global head of macro quantitative and derivatives research Marko Kolanovic, who has gained a following in the investment community for his market-moving announcements. The article reports that Kolanovic—who leads a global team of about 50 researchers– began developing his ideas about systematic investing strategies in 2015. The idea gained popularity, but also brought some blind spots into Kolanovic’s focus. “If you’re running a… Read More

Some Thoughts on Howard Marks’ Most Recent Memo

By Jack Forehand (@practicalquant) —   Howard Marks’ memos provide some of the deepest and most thought provoking insights in the investing world today. They are on par with Warren Buffett’s annual letters as one of the few must reads in investing today. Marks just recently posted a new memo, and the topics he covered were very close to home for me as someone who believes in quantitative and factor-based investment strategies.  The memo was titled Investing… Read More

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… Read More

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… Read More

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… Read More

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… Read More

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… Read More