Investment Philosophies: Quantitative vs Fundamentals Driven Investment

*Note: I have no professional background in investing or research or programming as such; just a fresh graduate starting in investing and shit-scared of the entire doom of fundamental equity research. Please assume that the questions are concentrated around equities only. Apologies for the verbosity. Open to getting schooled. *

I recently read an interview of a supposed top analyst on SumZero and was intrigued by this one statement (intact in spirit, may differ in words): The advantage that fundamental investors, who have an appetite for deep research including alternate data, have over algorithms and the herd is that both the algorithms and the herd are looking backward.

This got me thinking on several fronts:

I do agree that most retail investors look at it backwards and go by the principle, “Since it worked earlier, it will work now and in the future.”; that is a flawed strategy if not tested and moulded from time to time.

Now, similar to this, I believe even the AI algorithms are looking backward even if they have a lot of data. Hence, they are obviously not working on the good old modeling and projections which are corrected over a period of time as investors put the money where the model is. I am not aware of the competencies of AI on being able to build up on its existing learning. So the questions:

1. Isn’t a quant driven decision making process only as good as the parameters set by its programmers or analysts? Since there are infinite variables and externalities that may impact the price of a stock, at some point or the other, the algorithm that has beaten the market in the past will not beat the market in the future.

So, where is all this fear of the algorithms coming from? Assuming that ultimately the game comes down to researching for new parameters to evaluate the value of an underlying company’s stock and that again, comes down to deep research which is exactly what several boutiques focused on value investing are doing. Going by this theory, shouldn’t the quant only funds underperform in the long run against the value investing driven, deep research oriented fundamental investors?

2. When it comes to developing markets, where there are information asymmetries and volatility in terms of growth and earning predictions, shouldn’t the algorithms fail by design?

3. Finally, does alternate data and deep research over a shorter coverage range look like the saviour of the equity research and fundamental driven value investing school of thought?

I understand these questions are philosophical and generic in nature. Even if you don’t have a data supported answer, please give your personal subjective take on these. If possible, please differentiate your takes on the developing and the developed markets.