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 US$400 billion[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.

• Value investing
• Growth investing