Actively managed funds at BlackRock, the world’s largest fund company, are facing the new reality of quantitative investing, according to this week’s New York Times. The exchange-traded-fund business the firm bought from Barclays in 2009 has seen huge growth, “leaving in the dust the stock pickers who had spurred an earlier expansion for the firm,” according to the article. BlackRock has therefore adopted a plan to consolidate several of its actively managed funds “that rely… Read More
It seems that name-melding has extended beyond the ranks of celebrities (think Brangelina and TomKat) to the world of fund management. An article in this month’s Pensions & Investments explains how, in the face of disappointing performance, hedge fund managers are integrating quantitative strategies into their fundamental approaches in an effort to improve results. Lin William Cong, finance professor at the University of Chicago’s Booth School of Business (and self-proclaimed inventor of the term “quantimental”)… Read More
For nearly two decades, top value investor and columnist John Dorfman has been tracking a purely quantitative “robot portfolio” that has beaten the S&P 500 by about 12 percentage points per year. His advice: Don’t use it. In an interview with Wealth Track’s Consuelo Mack, Dorfman talks about why his robot approach isn’t suitable for the vast majority of investors. The strategy takes all stocks with market capitalizations of at least $500 million, eliminates those… Read More
Pete Muller, who runs PDT Partners, is described by Forbes as “the latest, greatest member of a growing band of hedge fund [managers] that use complex math and computer-automated algorithmic models to buy and sell stocks, futures and currencies based on statistical correlations and aberrations that can be found in the market.” Muller, who worked with Mogan Stanely for years before taking a hiatus in 1999 and eventually starting his own venture, has a strong… Read More
James O’Shaughnessy’s What Works on Wall Street is something of a bible for quantitative investors, and in a recent Investors Podcast, O’Shaughnessy talked about what his vast amount of research has taught him. O’Shaughnessy says it is critical to understand human nature if you want to succeed at investing. While his book detailed how dozens of quantitative strategies have worked over several decades, he says he wasn’t worried that disclosing the information would lead to… Read More
In a wide-ranging interview with Barry Ritholtz on Bloomberg View, quantitative investing guru James O’Shaughnessy recently talked about why human beings are such inferior prognosticators compared to computer models, what that means for investors, why stocks may well be safer than bonds over the long run, and why holding period duration is so critical.