As artificial intelligence models become more sophisticated, asset owners and managers are rethinking portfolio construction as an activity sitting at the nexus of human and machine, which means gaining an edge over the market increasingly needs investors to tap into the wisdom from both sources.
Andrew Lo, finance professor at the MIT Sloan School of Management, believes large language models can bridge the gap between fundamental and quantitative investing in a way that was unfathomable five or 10 years ago, and create ‘quantamental’ investment strategies which would bring together the best of both worlds.
As the era of double-digit returns winds down, Jim Christensen, head of the $65 billion Queensland Government-owned firm, is having the hard conversations with clients about expectations.
Common sense must be applied to statistical data and rules-based investing should only be adopted with caution. Investors should prepare for the inevitable moment when the game suddenly changes.
Quantitative investing needs to change, and should do so by scaling up to produce more proprietary data, reducing excessive numbers of signals and becoming more “market savvy”, according to the global head of equity research at BlackRock, Ronald Kahn.
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