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Quant allocations to rise in 2019, manager claims

Data analyticsA French asset manager is predicting a rise in quant investing over the next 12 months, although transparency concerns about the industry remain.

A survey conducted by La Française Investment Solutions (LFIS) among about 150 quant professionals found that 70% of asset allocators were considering allocation to quant strategies in 2019, LFIS said.  

The survey was carried out at a quant conference LFIS partly organised and the firm argued that investors and allocators were increasingly favouring the “benefits of a systematic-based approach”.

For two thirds of respondents the key benefit was the elimination of behavioural bias in these rules-and-statistics-led strategies. Additionally just over a quarter also cited the desire to access new sources of performance (28%). Together these were seen as the biggest benefits of quant funds.

Arnaud Sarfati, co-founder of LFIS, said that the results showed a better understanding of quant strategies among investors and the growing influence of technology and data.

“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,” said Sarfati.

However, a perceived lack of transparency was cited as the biggest challenge facing quant strategies by 39% of respondents, while just under a third cited a lack of casual reasoning and imagination.

Transparency concerns were raised as an issue for quants in another survey last year.

Guillaume Garchery, head of quantitative research and development at LFIS, said: “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.”

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