- The Financial Times – Goldman Sachs’ lessons from the ‘quant quake’
Nearly 10 years after its nadir, quantitative investing is again the hot trend in finance
What became known as the “quant quake” subsided in a week and was largely contained within the computer-powered investment industry. It was soon overshadowed by the global financial crisis. But it scarred a generation of financial scientists on Wall Street. Even Renaissance Technologies, the legendary hedge fund co-founded by cold war codebreaker James Simons, suffered painful losses, and it nearly obliterated Goldman’s QIS. Nearly a decade later, quantitative investing is once again the hottest trend in finance. Computer-driven hedge funds have just notched up their eighth straight year of client inflows, doubling their assets from 2009 to $918bn, according to Hedge Fund Research. Even this understates the interest, as many traditional hedge funds and big mutual fund managers are all trying to blend more quantitative techniques with their traditional approaches. QIS is emblematic of the quant renaissance. In 2011 Goldman Sachs put its top computer wizard, Armen Avanessians, in charge of the division. He has helped turn round its fortunes. The arm’s assets under management reached a nadir of $38bn in 2012, but it now manages $91.8bn — still below the unit’s pre-crisis peak. “The first thing I did was to fly to our biggest clients and apologise,” he says. “All bad things involve crowding and leverage, and the quant crisis was no different. But the core idea that computers can do a lot of this better than humans was right?.?.?.?I feel that we’re just at the early stages of this quant revolution, and that gets me excited.”
