SEPTEMBER 12, 2016

This recent headline on Bloomberg caught my attention.

“There’s a Simple Reason Why UBS Is Hiring So Many Quants”

The Swiss financial giant UBS Group, which oversees nearly $2 trillion, has in the past couple of years doubled the number of quantitative analysts (quants) working in the office of its Chief Investment Officer, Mark Haefele.

And Mr. Haefele wishes to hire more.

In an era of low interest rates and low investment returns, wealth management giants are seeking out new ways of managing money and looking at risk, in order to improve the return performance.

And quantitative model based investing is one strategy that can assist in enhancing returns and improving consistency.

As Mr. Haefele noted in his interview in Zurich. “In many cases the answer is yes, a machine could do a better job than a person.”

Earlier this year, the wealth management firm even hired a team to focus on short-term investment strategies, and is now managing more than $1.5 billion through quant analysis.

Systematic Investing driven by quantitative models has continued to gain ground in the face of poor performance from Active Management strategies. Our recent article, Active Management Loses Ground, presented recent statistics on how over a 5-year term, more than 80% of managers cannot beat the S&P 500 benchmark, and even worse more than 90% of the smallcap managers cannot beat the S&P 600 Smallcap benchmark.

Individual investors must review systematic investing as a portfolio investing tool, in light of mounting evidence of its effectiveness and the growing shift towards quantitative investing by giant wealth management companies.