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Billions and Axe Cap and Quants, Oh My!

Posted in Insights

On the hit Showtime series “Billions,” the line between truth and fiction is blurred when the introduction of quant strategies to the fictional world of Axe Capital creates new challenges and complexities that closely mirror current industry trends and issues faced by hedge funds across the globe…

The main character of the show is Robert “Bobby” Axelrod, hedge fund manager of Axe Capital and self-made billionaire who has built his entire fortune from the ground-up based on his genius investing abilities. However, in the third season of the show we learn that new competition from a growing number of quant funds is outperforming Axelrod and threatening Axe Capital’s future success. In a move to stay competitive with other hedge funds that have adopted quantitative investment strategies, Axelrod launches a new quant project at Axe Capital. At this point in the show it is evident that current events have inspired the plot line to some degree, mirroring the real-world industry trend to move money from traditional hedge funds into quant shops or exchange-traded funds (ETFs).

The Financial Times’ Lexicon defines quant funds as “funds that use quantitative analysis using computer-based models to inform their decisions on whether to buy or sell securities.” By relying on advanced algorithms to make decisions, computer-driven quant funds can comb through massive amounts of data – far beyond the scale of what humans are capable of analyzing – to identify investment strategies.

Chosen to lead the new quant project at Axe Capital is Axelrod’s protégé, Taylor Mason. Brilliant and highly-analytical, the non-binary (i.e. gender neutral) Mason often seems to be more machine-like than human – reminiscent of a quant fund in their (Mason’s) ability to remove potential errors that can result from human decision-making. When describing his protégé to a room of potential investors Axelrod says, “Taylor is the single most effective manager of money I have ever come across. They are the future of Axe Capital.” It seems here that Axelrod is talking about quants, as much as he is, Taylor Mason.

While there are massive benefits to quantitative investing, the logistics of implementing such an approach can be costly and time-consuming. The resources needed to explore data to find new strategies and boost returns are expensive, usually requiring a team of data scientists or other highly-technical talent able to collect and analyze data to pinpoint a differentiated investment strategy. Top quant funds have been known to employ armies of data scientists to drive these strategies forward.

The difficulties of launching a quant strategy are portrayed extensively on “Billions.” Just the internal announcement to staff about the intention to launch a new quant project is enough to send shockwaves of panic through Axe Capital analysts and even the COO, Mike “Wags” Wagner – fearing the new quants (“the robots”) will replace them and their jobs at the company. With employee engagement at an all-time low, we then witness a long and arduous hiring process to build a quant team as Mason struggles to hire the right, qualified candidates for the job. Finally, once all the quants have been hired, the team is faced with new problems around developing the ideal algorithm for their fund. But employees aren’t the only ones for which the new quant fund is causing frustrations – viewers watch as Axelrod increasingly struggles to blend his traditional, fundamental way of investing with new-age, computer-driven quant strategies.

Quantitative investment strategies will undoubtedly play a significant role in the future of finance – but that doesn’t mean that fundamental strategies will completely fall by the wayside. One path forward is to combine the best of both worlds into a quantamental future.

In the past, quants have been the only finance professionals with the ability to manipulate data and use it to implement systematic investment strategies.

However, now there are new technologies that enable finance professionals – not just quants – to unlock the power of data and implement a hybrid investing approach that leverages the power of both fundamental and quantitative strategies.

The Elsen nPlatform enables anyone to effortlessly harness vast quantities of data to make better decisions and quickly solve the most complex problem. The platform is designed to allow any financial professional – including people in investment, research and analytics roles – to transform the way they work by letting them use data to guide investment decisions without relying on data scientists and expert programmers. You can learn more about Elsen nPlatform at https://elsen.co/platform.

Thomson Reuters QA Point powered by Elsen is one example of how Elsen nPlatform has been customized to meet specific needs for data-driven strategies. QA Point powered by Elsen is the first commercial product built on the Elsen nPlatform, allowing investors to introduce cutting edge quantitative research and analytics to investment management. For a short video overview of the product, visit https://tmsnrt.rs/2wonG8e.

You can also learn more about the power of Elsen nPlatform and quantamental investing tools by watching Elsen CEO and Founder, Zac Sheffer’s recent presentation and onstage demonstration of the platform at Empire Startups’ FinTech Conference in Toronto. Click here to watch the full video: http://bit.ly/2wq8gR1.

Jane is Elsen’s chief storyteller and customer advocate, and also quarterbacks the company’s go-to-market strategy.