Quantitative fund

See Outline of finance § Quantitative investing for a listing of relevant articles.

An investment process may be classified as "fundamental" or "quantitative" - based on the way asset managers make their investment decisions. [2] If the entire procedure is by human judgment (or intuition), an investment process will be labeled as "fundamental"; and only if purely done by computer-based models, can the process be classified as "quantitative". A hybrid approach - increasingly common - has a money manager utilizing both.

The quantitative investment process, essentially, breaks down into three key components:

• Input system: Providing all necessary inputs such as market data and rules (see financial data vendor);
• Forecasting engine: Generating estimations for prices and returns and also, risk parameters;
• Portfolio construction engine: portfolio composition using optimizers or a heuristics-based system (see Portfolio optimization #Optimization methods and #Mathematical tools).

Portfolio managers here usually require a strong background in mathematics and programming / computer science, as their algorithms employ advanced optimization methods built on sophisticated mathematics; see Quantitative analysis (finance) § Algorithmic trading quantitative analyst

In recent years, quantitatively managed funds have become a popular method used by newly launched mutual funds as asset managers adopted statistical models to explore profits that may be made out of market abnormalities. As of year-end 2004, 70 quantitative products that had an established track record by Casey, Quirk & Associates managed $157 billion, nearly double the assets from three years earlier when they stood at about $88 billion. By comparison, the assets in non-quant products increased to $925 billion from $720 billion, a 28 percent increase. Yet, quantitative investing accounts for 16 percent of actively managed assets in the U.S., up from 13 percent in 2003, according to Vanguard.[3]

After the sub-prime mortgage market turbulence, which cast long shadows over many parts of the financial industry, the total mutual fund asset that employ quantitative model is estimated to be over 400 billion US dollars[4] at the end of June 2016.

Another concept that might make people confused is that quantitative funds can be operated as a hedge fund as well as a normal one. As a manager of a hedge fund whose job is to earn absolute return, one can employ varieties of strategies such as market neutral, statistical arbitrage, or high-frequency trading strategies to enhance the return of one's portfolio, and also high leverages, since there are little constraints in operating hedge fund. But as a quant-mutual fund, an asset manager delivers alpha by stock screening and disciplined risk managements.