Bridging the fundamental/quantitative gap
As the name implies, quantamental investors and analysts combine fundamental and quantitative techniques, bringing the best of both worlds into one approach.
Fundamental analysts focus on bottom-up analysis of securities or companies that sought to find the intrinsic value of a particular asset using metrics ranging from macroeconomic conditions and industry performance, to management and financial statements. Quantitative analysts, or “quants,” focus on hyper-technical evaluation of assets based on market data, such as price and volume. Fundamental factors like earnings, expenses, liabilities, and other balance sheet items rarely – if ever – come into play here.
The idea of combining these two approaches into the quantamental paradigm is largely born out of necessity. The sheer quantity of data available to investors today is making it possible to gain greater insights on the performance of a particular portfolio than ever before. It’s clear that in order to stay ahead of the curve – and in some respects just keep up with it – hedge funds and asset managers will need to find ways to harness and use all of this data.
That’s easier said than done. There are two key problems facing shops that want to adopt quantamental methodologies:
Finding tools to facilitate quantamental investing and analytics
Building out the infrastructure and hiring the people with the expertise to supplement the quantamental approach can take well over a year and be cost prohibitive. The desire among financial institutions, however, to use these techniques and methods has led to the development of platform and software solutions that make it easy and quick to harness and use data.
The Elsen nPlatform, for example, was designed to be a platform on which applications that solve the aforementioned problems with implementing quantamental research and analytics can be built. Thus, financial Institutions can easily build applications that help them solve problems more quickly.
Three key components of the nPlatform are Data Store, Processing Engine, and Intelligence Engine, which directly address the challenges posed by the quantamental approach.
The emergence of solutions like the nPlatform is just one of the signals pointing to the growing trend of the quantamental investor. As these tools proliferate in the marketplace, it seems likely that financial institutions that can take this approach will come out ahead of the game. Making data easy to harness and use can reduce the time-to-insight and drive a more efficient research and analytics process.