Sixteen Quant Leaders Weigh-In on What Happens Next

A recent article in Bloomberg offers insights from sixteen leading quants regarding what’s on the horizon, “as factor strategies misfire and competition heats up in everything from artificial intelligence to fees.”

Here are highlights from some of the comments:

  • Cliff Asness, Managing and Founding Principal of AQR Capital Management: “The current value spread is among the widest in history. In other words, value appears currently quite cheap” and recommends that investors assume a modest tilt toward value.
  • Alfred Spector, CTO of Two Sigma Investments: “I think we’ll see quantitative approaches…play a growing role in private market investing.” He also argues that as more financial services companies apply artificial intelligence techniques (i.e. machine learning), “it will become apparent that human talent and effective teaming are key to unlocking their promise.”
  • Sandy Rattray, CIO of Man Group: The future of quant investing will depend on more “sophisticated strategies” to generate more alpha. “These new strategies—many of them non-linear and employing machine learning—will be difficult for most market participants to develop and will certainly not be immediately apparent.” The best quants, he said, will continue to find improved efficiencies, particularly in trading.
  • Savina Rizova, Head of Research, Dimensional Fund Advisors: “More managers will hop on the big data bandwagon to try and time the market or find mistakes in prices. Investors are better off having a robust investment framework that avoids the trap of chasing spurious data patterns.”
  • Rob Arnott, Founder, Research Affiliates: “Just as the traditional analyst and portfolio manager had a massive blind spot in overlooking the power of quantitative methods to strip emotion out of our investing decisions, the now-dominant quant community has blind spots.” To a quant, he argues, “anything that can’t be quantified is ignored.”
  • Andrew Ang, Head of Factor Investing Strategies, BlackRock: Over the next decade, he said, financial advisors will “use the language of factors to create bespoke portfolios” and individuals will be more “outcome-oriented with factors—growing their nest egg with value and momentum, or being more defensive with factors like minimum volatility or quality.”
  • Inigo Fraser Jenkins, Head of Global Quantitative Strategy, Sanford Bernstein: “The big challenge in investing for the next 10 years is going to be: How can asset owners beat inflation in a lower return world and where diversification is harder to come by?”
  • Marko Kolanovic, Global Head of Quantitative and Derivatives Strategy, JPMorgan Chase: “In the next decade, we expect further increase in the use of technology and quantitative models in the investment process.”