LFIS, a USD14 billion Paris-based asset manager, has released the results of a new survey which highlights the continued influence and growth of quant investment strategies in Europe.
With nearly three quarters (70 per cent) of allocators considering quant strategies to complement existing active allocations, investors and allocators are increasingly favouring the benefits of a systematic-based approach. Two thirds of respondents voted the elimination of behavioural bias (38 per cent) and access to new sources of performance (28 per cent) as the most important advantages of this style of investing.
Arnaud Sarfati, co-Founder of LFIS, says: “It is clear that quant investing is becoming better understood and used by investors, and we expect appetite to continue to grow into 2019 and beyond, as the influence of technology and data continue to permeate the asset management industry. As the lines between systematic and discretionary styles converge, this will enable the quant finance sector – including academia, managers and investors – to work collectively to promote knowledge sharing and understanding across quant approaches and move the industry forward.”
The data also supported the continued pick-up of factor-based strategies, which select investments based on certain, defined characteristics and attributes, with 60 per cent of survey respondents planning to increase their allocation to factor-based strategies and only 1 per cent who would decrease their allocation to factor-based strategies in 2019.
There are, however, challenges associated with machine learning in asset management, most notably a perceived lack of transparency. Thirty nine per cent of respondents cited this as the greatest challenge, followed by a lack of casual reasoning and imagination (32 per cent).
Guillaume Garchery, Head of Quantitative Research and Development at LFIS, says: “With markets becoming increasingly difficult to predict, we believe that a quantitatively-driven approach, which offers a consistent, repeatable roadmap for performance, will serve investors well. As allocations to quant strategies increase and the number of available strategies grows, it’s important to remember that managers need to have explainable models behind the theory and be able to convey an understandable and sustainable portfolio construction process to investors.”
The Quant Vision Summit, organised by LFIS in partnership with the Quant Management Initiative (QMI), bought together more than 150 quant professionals from across Europe and beyond to build better bridges between academic and professional circles, and facilitated important dialogue around the future of quant investing. The Summit looked at the challenges associated with this approach, and also shone a spotlight on new and innovative areas of asset management and the capabilities of Europe in this space.
