Hedge funds: Have investors got the measure of quant?
Euromoney, is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024
Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Hedge funds: Have investors got the measure of quant?

Quantitative hedge funds are increasing in number. Larger ones with the money to invest in research, technology and staff are becoming ever bigger while smaller quant funds struggle to keep up. Are quantitative strategies the sure-fire way to uncover and pin down alpha, as many investors are beginning to believe, or is human intervention in their implementation still all-too important? Helen Avery reports.

quant-main.gif

"I CALL IT the revenge of the nerds," says Andrew Lo, a professor at Massachusetts Institute of Technology, and director of the university’s Laboratory for Financial Engineering. Lo is referring to the growth in demand for statisticians, mathematicians, physicists and astrophysicists from hedge funds, asset managers and banks. As one hedge fund quant employee advises a student enquiring about a future career in finance on a US website: "Forget taking economics. Stick to mathematical modelling and programming."

It is an interesting transformation. "In the US, Harvard and Yale have tended to be the suppliers to the finance employment market but now universities such as MIT and Caltech that produce technologists are beginning to have an advantage," says Lo. He is bound to be a little biased, but his statement is supported across Wall Street – quantitative investment strategies, often involving advanced computer programming and mathematical modelling, are becoming an increasingly common feature of the financial landscape.

The demand for staff who can develop and monitor complex algorithms in the search for alpha, and the attractive fees it can bring, is probably at its fiercest among hedge funds.

Gift this article