Quantamental investing: The future is now

MAY 2018

In their quest for new ways to generate alpha, investors continue to pump cash into factor and quantitative-based strategies. Quant Investing–Bridging the Divide,¹ an article that explores the trend, says the pool of assets in these strategies has surged to US$1.5 trillion and is growing at a rate of 17% annually. Applied Equity Advisors have been adherents of factor-based investing for 15 years, but we find it works best when supplemented with traditional stock selection.

Investors are embracing factor-based and quantitative approaches because they have delivered excess returns. Research shows that, over the past 20 years, broad market factors—such as valuation, growth, quality and momentum—have driven about 65% of a global equity manager's relative returns.²

Andrew Slimmon

Head of Applied Equity Advisors Team

Leslie Delany

Executive Director

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¹“Quant Investing – Bridging the Divide”, Morgan Stanley Research, October 1, 2017.

²Morningstar, Rolling 18-month regression for Global Equity Managers, December 2015. Returns are net-of-fees based on mutual fund NAVs.

DISCLOSURE

The views and opinions are those of the author as of the date of publication and are subject to change at any time due to market or economic conditions and may not necessarily come to pass. The views expressed do not reflect the opinions of all investment personnel at Morgan Stanley Investment Management (MSIM) or the views of the firm as a whole, and may not be reflected in all the strategies and products that the Firm offers.

This general communication, which is not impartial, is for informational and educational purposes only, not a recommendation. Information does not address financial objectives, situation or specific needs of individual investors.

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Prior to making any investment decision, investors should carefully review the strategy’s/product’s relevant offering document. For the complete content and important disclosures, refer to the link above.