Lars, a quant is someone who when asked "your money or your life", attempts to calculate the implied volatility…
Well, that’s just one out of a hundred jokes about quants that draws a pretty clear picture of what non-quants think about this special type of financial engineers. Let me tell you, it’s not true. Not entirely at least. And, I assure you we are working hard on radically changing that image.
So why “Quant”?
The world, as it is today, is quite different to what it used to be 20 or more years ago. As an investor in the 1980s it was all about having an information lead on everyone else: access to information was the problem.
But these times are over!
You’re right. Information availability is no longer the crucial factor for successful investing. Nowadays, processing the information is the key. The sheer amount of data that hits the markets every day cannot even remotely be processed by means of conventional methods. But not everything that can be counted counts. There is a lot of noise in the data. In order to manage this information overload, we need tools that are able to handle all of this data in an efficient and comprehensive manner. New techniques from machine learning offer just that.
And there’s the problem, that people tend to make decisions against the background of their own subjective environment.
That’s probably the strongest argument in support of quantitative asset management. We are all driven by the latest headline, the most recent interview on Bloomberg or even the emotional atmosphere during our last meeting. These factors enter the decision making process and bias it in an undesired way. In contrast, by their very nature, computers are emotionless and rational machines. Computers don't commit mistakes when evaluating the available information or when putting the evaluations into reasonable context.
So to summarize: Your understanding of "quant" is an efficient way of dealing with complex data…
…of which about 90% are fundamental and 10% are technical.
And why HQAM AI Solutions?
Quant is not limited to a certain asset class! We at HQ Asset Management do not restrict ourselves in the use of quant methods. We love to leverage the findings from our quant research in every possible way. Thus, we are able to unleash a whole range of synergies! That's why our organizational structure is set up perfectly to match the requirements of a strong value chain. Out one-team approach reduces information loss to the minimum and safeguards our processes from being caught in silos.
What’s at the core of HQAM?
There is the AI-based quant equity strategy. This strategy exhibits extreme flexibility regarding parameterization so that a wide range of investors' needs can be captured. We like that concept a lot and use it within our investment strategies either as a stand-alone or as a building block for our more complex multi-asset strategies.
What about your Tactical Asset Allocation?
If you look at our Tactical Asset Allocation you will find the same investment philosophy that you are already familiar with from the quant equity management. Of course, the methodology is quite different: one process is bottom-up and the other is top-down.
So what do both strategies have in common?
They share similar basic considerations: fundamental, structured and disciplined. Our TAA approach is set-up in building-blocks and can easily be custom-tailored to fit clients’ needs. It can be used either as an overlay or as a stand-alone multi-asset strategy. It is an extremely versatile and flexible investment concept which is applicable in both worlds, private wealth and institutional asset management. Tailor-made portfolios are always at the forefront of solutions.
And the risk management?
Our product portfolio is completed by a state-of-the art risk management concept that we like to call Target Risk. Based on the very accurate forecasting of the market volatility the ratio of risky assets is constantly adjusted in order to provide the investor with a near-constant portfolio volatility.
What’s the bottom line?
First, HQ Asset Management quant strategies offer a fundamentally driven, disciplined and structured investment approach which in combination, leads to transparent decision making. Second, HQ Asset Management quant strategies are flexible and can be easily adjusted towards the individual needs of any investor - benchmark-oriented and total return. And third, HQ Asset Management quant strategies are efficient. Due to systematic building blocks and research synergies we are able to work within a lean production framework.
So no more jokes about quant?
Why not? We lough about them. Last but not least, the people make the differnce. Due to the increasing amount of economic data, quant tools will become an ever-growing part of future investment processes. HQ Asset Management offers easy access to experienced specialists in this field. And these guys are really happy to come to work. It's not hard to see why. They work with models every day!
About the author
Dr. Lars Edler works at HQAM as Managing Director and Chief Investment Officer on the optimal rule-based quantitative solutions for institutional investors. Previously, Edler was Co-CIO and Head of Investment Strategy, responsible for the tactical investment decisions of Sal. Oppenheim's institutional and private asset management. With a doctorate in economics, Edler also has extensive experience in the development and refinement of investment processes and as a portfolio manager.
HQ Asset Management (HQAM) is one of the financial service providers of the Harald Quandt group. The financial service providers have stood for independence, competence and sustainability for decades. We are committed to this tradition. The HQ Group employs more than 200 people and manages and advises assets of more than US $ 20 billion. The clients of HQAM include banks, insurance companies, pension funds, corporates, family offices and foundations.