"Quantamental" firms?

I've heard the buzzword thrown about a bit to describe specific teams at some MM shops and P72 thinks they are quantamental but I'm skeptical the academy really has true "quant" involved. Do people know of firms that are embracing the combination of quant trading and fundamental research is a legitimate way?

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Comments (38)

Jul 22, 2020 - 11:21pm

would love a pm - am in the space

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  • Analyst 3+ in HF - EquityHedge
Jul 24, 2020 - 9:14am

generally come in two flavors.

The central teams that tag, annotate, and do some preliminary analysis and then its sold internally to PMs on the platform, or the genuine quantamentalists that actually try and generate alpha. The second type is much harder.

  • Analyst 3+ in HF - EquityHedge
Jul 26, 2020 - 6:28pm

this would be considered quantamental in the industry. Like I mentioned above, either you come from the quant side and basically still trying to automate everything and use the alternative datasets as a source of predictive features or you come from the fundamental side and the alternative data sets are used to provide new themes or variant perception on certain names.

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Jul 26, 2020 - 2:14pm

Even though the question is more around hedge funds in the US, I thought it might be beneficial to explain what is quant and fundamental in how I manage my portfolio, which is classed as "quantamental" product at my firm (long only).

It's quite a fluid term, different people define it in different ways. I came from the fundamental side, so my quant skills are not great to begin with. In my case, the quant part has nothing to do with quant trading, complex ML algos nor alternative data sets. In fact, the alternative data sets I only use to form/check some fundamental hypothesis on some names I hold (I consider that part of the fundamental area - and most people will).

So, the quant stuff. I use it in 2 places, screening/alpha testing and optimization/risk management. For screening, I pick fundamental metrics based on research and back testing and then assign alpha scores to stocks based on these metrics. This is how I create my investible universe. For risk management, as my portfolio is quite diversified, I use a quant optimizer to reduce any unwanted factor risks or exposures (or increase exposures I want to from fundamental research).

Most of the work in between screening and optimization is fundamental research. This is how I pick names, sectors, countries, and weights.

  • Analyst 3+ in HF - EquityHedge
Jul 26, 2020 - 6:26pm

screening is very common. Many fundamental investors have written books on this so I wouldn't consider it quantamental.

second part, more and more fundamental groups have been using, though generally they outsource it to a quant consultancy. Interesting though that you do this at a long only. Generally, fundamental shops that are long only or SM have fairly concentrated portfolios and an optimizer doesn't usually give you much. Add to this the longer holding periods also means a lot of the risks you hedge out change their correlations etc its usually used for a stat arb portfolio.

Btw, have you seen an added benefit from the portfolio optimization?

Jul 27, 2020 - 11:39am

Yeah, I agree on the screening front, both sides use it. But coming from the fundamental side, the complexity of the screening is higher on the quantamental portfolios (and you do more back testing, which I didn't really do on the fundamental side).

My portfolio is more diversified than a typical fundamental portfolio, so realistically I can't manually optimize for various exposures, hence the quant optimizer. I definitely see an added benefit in that I don't breach any tracking error limits or overweights, so that's more on the risk side. But managing my tracking error while keeping my alpha increases my information ratio, which is the key metric I'm evaluated on.

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