Transcript Larry Pohlman - Quaffers.org

FOR PROFESSIONAL INVESTORS
The Business of Quantitative Investing
Larry Pohlman
BNP Paribas Asset Management
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What is Quantitative Investing?
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How Do Quants Add Value?
● Scalability of coverage and uniformity of skill across a broad opportunity set
● Focus on risk as well as return
● Ability to employ multiple factors simultaneously
● Efficient distribution of risk budget
● Ability to digest disparate information quickly and translate into actionable
recommendations
● Continue to evolve factors and adapt process to changing environments
● Handle special objectives
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Risks Quants Face
● Common factor exposure removes “inefficiencies” and drives commoditization of the
industry
● Structural market shifts
● Fundamental investors incorporate benefits of quant
● Data lag and inaccuracies
● False precision
● Difficulty in processing qualitative information
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Industry Research Themes
● Forensic accounting
● Low volatility investing
● Regime switching models
● Questioning capitalization-based models
● Text mining: Quantifying qualitative information
● Data mining
● Advanced optimization
● Dynamic factor models
● High frequency
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What Makes a Great Quant Firm?
● Discipline and rigor in process
● Capital markets and accounting expertise
● Unique analytical advantage
● Technological: superior software and data
● Unconventional wisdom
● Focus on efficient execution