Transcript Presentation title

FOR PROFESSIONAL INVESTORS
The Business of Quantitative Investing
Larry Pohlman
BNP Paribas Asset Management
| 16/07/2015 | 2
What is Quantitative Investing?

Characteristic
Fun
damental
Technical

Approach
& Growth
omentum
Quantitative
Value
M
Value & Growth +
Momentum

Market
Subset
| 16/07/2015 | 3
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
| 16/07/2015 | 4
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
| 16/07/2015 | 5
5
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
| 16/07/2015 | 6
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