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The World According to Quants: From Alpha Discovery to Execution

The World According to Quants: From Alpha Discovery to Execution

Aite Group estimates that 12% of all global assets under management were driven by quant analysis at the end of 2007, representing US$6.65 trillion. This figure is expected to reach 14% by the end of 2010, representing US$10.86 trillion.

By Sang Lee, Sang Lee

Boston, MA, March 19, 2008 – A new report from Aite Group, LLC examines quantitative investment strategies, with particular focus on the alpha discovery phase of the quantitative investment life cycle. The report highlights key trends and challenges that quants face in the pursuit of alpha generation.

The use of quantitative/technical analysis has always had a following in the pursuit of alpha. The emergence over the last decade, however, of quant funds that rely mostly on computer-driven investment models to generate buy and sell signals has captured the imagination of the financial services industry. Often admired and simultaneously vilified, the exact mechanics and overall performance of quants are rarely discussed in public. Nevertheless, one thing is quite clear: Despite a few very public bumps along the way and accusations of quant funds distorting market conditions and worsening market volatility, the application of quantitative analysis is definitely here to stay.

"Once shrouded in mystery, the veil is gradually coming off of the quant world," says Sang Lee, managing partner with Aite Group and author of this report. "It seems clear that the quant market is undergoing an evolutionary process, moving from the secrecy of the few to a more open and highly competitive landscape where every second counts. Those firms which are able to implement a highly efficient process for alpha discovery will gain a significant competitive edge for years to come."

This 30-page Impact Report contains 15 Figures and three Tables. Clients of Aite Group's Institutional Securities & Investments service can download the report.