The hedge fund strategy equity quantitative offers investors a way to complement existing portfolio allocations. Different models and the broader concepts behind them should be examined by investors.

The hedge fund strategy equity quantitative (equity quant) is shaking off its image as a black box, opaque way of making money.

Equity quant in a broad sense simply means using mathematical or statistical techniques to manage the portfolio. Computers are used as a tool to implement the strategy. It is the strength of the expertise in the design of the strategy that makes it good or not.

While some investors still find the concepts difficult to follow, managers are trying to help make the strategy more accessible and explain some of the broader concepts behind it.

A panel discussion, sponsored by Lyxor Asset Management, ranged over a variety of topics, particularly focusing on the opportunities managers are finding in pursuing this strategy as well as some of the drivers of some of the models used by managers.

Issues covered include defining equity quant as a hedge fund strategy; examining how the strategy has changed and adapted since 2008; how the model used can adapt to a changing environment and what kind of timeframe is acceptable for a model to evolve and what kinds of questions investors should be asking before investing with an equity quant manager.

In addition, discussion centred on how regulation has impacted the strategy and whether increasing rules and oversight will curb alpha creation. What managers see as the main challenges for this strategy and a forecast of how the strategy will perform in 2012, were also discussed.

Speakers include Dan Jelicic, portfolio manager and head of the research and development programme at Sabre; Paul Simpson, portfolio manager and head of systematic investments at Old Mutual Asset Management; Richard Mathieson, head of strategy for Europe in scientific active equity team at BlackRock; and Philippe de Beaupuy, senior hedge fund analyst, Lyxor managed account platform. The panel was moderated by Margie Lindsay, editor of Hedge Funds Review.

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