Quant strategies are poised to “push deeper into previously inhospitable markets such as corporate debt and private equity,” says Man Group CIO Sandy Rattray. This according to a recent article in Financial Times.
Rattray, who is retiring later this year after thirty years in the industry, described the invasion of quants into fund management as “unstoppable,” adding that he expects computer-driven models to seize more territory in areas of the market that once were considered dangerous for quants. “Markets have in almost every area become significantly more quantitative, and that will probably continue,” he said, adding, “There are some holdouts, but they are also going to fall eventually.”
Besides the industry’s adoption of more quantitative approaches, Rattray said that over his career he has seen a huge change in the speed and cost of trading: “Twenty years ago if you had talked to a fund manager about an earnings yield factor, they’d look at you like you had two heads.”
According to Rattray, the corporate bond market and private equity are the next to areas to feel the invasion of quants. According to the article, he “thinks the next big frontiers will be improving how well machines analyze text, rather than just numbers, and harnessing the potential power of machine learning, another field of artificial intelligence.”
Although machines can’t read bond prospectuses “as well as a human,” Rattray quips, “they might eventually get there, and when they do, the good news is that they never get tired or bored of reading them.”