What Is ‘Quantamental’ Anyway?
“The concept of integrating human judgment with the best techniques of quantitative managers for generating or capturing alpha is gaining strength as a trend in the financial industry. But there are many misconceptions about quantitative management, how such managers trade and pick stocks, and what quantitative techniques can achieve.
A quick search in Google shows more than 10,000 results for “quantamental,” despite the fact that it is not an official word. The reason, of course, is that traditional active management has been underperforming passive management, particularly when fees are accounted for, and people are therefore looking for new approaches. Quantitative managers, on the other hand, have done well versus their benchmarks in many cases, and both “Big Data” and “Artificial Intelligence (AI)” generate the type of marketing buzz that buy-side salespeople love.
At the same time, for some investors, there is still a stigma attached to fully quantitative asset management. Those fearful investors equate the description of “quantitative manager” with market-neutral hedge funds exclusively, or believe that they rely solely on technical, price momentum strategies using so-called “black box” algorithms. There are also investors (described in an earlier piece) that have substantial concerns about technology failures or machines running amok. The concept of integrating human judgment with the best techniques of quantitative managers for generating or capturing alpha is, therefore, very appealing. Thus, “quantamental” was born and is gaining strength as a trend in the financial industry.”