An odd period for quant in the Australian equity market
Many investment managers use quantitative screens to focus their attention on the investment opportunities that are most likely to reward close study, and we are certainly among them. Over the years we have built software tools that make it easy for us to analyse the historic performance of a wide range of fundamental and other data points in forecasting future investment performance.
Tim joined Montgomery in July 2012 and is a senior member of the investment team. Prior to this, Tim was an Executive Director in the corporate advisory division of Gresham Partners, where he worked for 17 years. Tim focuses on quant investing and market-neutral strategies.
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Karan Mehta
:
Thanks Tim,
Would like to hear your views on Montgomery alpha plus fund in this context?
Tim Kelley
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That’s a good point, Karan, and I should have called out the Alpha Fund in the article. While it is relatively small in terms of FUM, it is the fund most affected by the performance of the quant models, and the one that stands to gain the most from a reversion to more “normal” factor performance. I’ll be sending a description of the analysis directly to the Fund’s investors as it is particularly relevant for them.
peter s
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This takover of “quant” investing in the markets is quite depressing to me. In the same fashion as index funds, they seem only to add to the zero sum game feel of the markets. Does this type of investing make any attempt to invest where capital is best deployed to benefit society in the long run? That is after all why the finance industry exists. This seems to have been forgotten by this industry, exemplified by the revelations of the Royal Commission (although only a hear no evil, see no evil, speak no evil mindset would be surprised by these reports).
Having got that rant off my chest, I would be interested to know what proportion of investment decisions for Monti funds is based on human research and reasoning as opposed to quantitative methods? I imagine it is quite high as this blog is a great place for this type of more informative and useful information.
Tim Kelley
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I understand your point of view, Peter, but the growth of quantitative investing may be more beneficial than it first seems. Firstly, metrics aimed at value and quality form part of many quant systems, and certainly form a large part of ours, and to that extent, they are just trying to do what human investors do, but in a very systematic way. Secondly, to the extent that quantitative investing makes markets more efficient (and it is difficult for any investment strategy to succeed unless it exploits some existing market inefficiency), then they serve the goal of efficient capital allocation. You wouldn’t want 100% of the market to be invested this way, but it is probably helpful to have part of the market invested this way.