It has been a humbling few years for many quantitative fund managers. The 2018-2020 period has been described as a dark winter for the sector as many of the investment strategies pursued by these data-driven fund managers struggled.
Despite a pick-up this year, I am often asked if I still have faith in these strategies after having spent more than 35 years of my life designing and analysing them while investing in the sector. My short answer is yes, but with certain caveats.
First, not all managers are created equal. Quantitative strategies encompass a wide variety of styles, markets and philosophies. Unlike in the 1980s and 1990s where merely the introduction of structured data and computing power offered a competitive advantage, today a firm labelled “quantitative” doesn’t give much insight into how the money is actually being managed.