Rob Goodlad, the chief executive of SSgA in Australia says bluntly: “It’s not over for quants.” Morry Waked, BGI’s chief executive in Australia, says that if many people are doing the same thing with investments, irrespective of whether they are quants or fundamental managers, it will be hard for them to add value. In the US in particular, he says, there are a lot of ‘plain vanilla’ quant funds. You need proprietary research to stay ahead of the game.

The three standard factors used by many quant firms are value, momentum and revisions (which some include in momentum). Watson Wyatt estimates that between 2001 and 2006, the global quant money managed by the largest eight quant managers increased five fold. This does not include the money managed using quant tools by some large fundamental managers, let alone hedge funds which use quant techniques.

The two main elements which emerged in the US and elsewhere in November were the de-leveraging theme and the looming macroeconomic downturn. Quant analysts were slower to react than their ‘real money’ counterparts, Lacaille admits. But this does not reflect a backward-looking bias. “While we rely on patterns, we still use a lot of forward-looking measures,” he says.

Roz Amos, the head of manager research for Watson Wyatt, Australia, is measured in her comments, well aware of the sensitivities surrounding the issue. “It’s not an absolute ‘no’ from us, it’s more a ‘be cautious’,” she says. “Investors need to check the managers’ experience and see what tools they’re using. Will they be ahead of the pack in an increasingly crowded space? What will they do in a crisis? Managers need to show their risk management side is sewn up if they are going to be doing a lot of shorts.”

The manager which forged ahead of the long/short pack in Australia over the past 12 months uses both quant tools and fundamental research. Tribeca Investment Partners, which last month aligned with Grant Samuel Funds Management, has a two-year-old active extension fund (maximum 150:50) run by Sean Fenton. Fenton has a quant background with AMP Capital Investors but employs fundamental analysis as well on both the long/short fund and the broad market long-only fund which is also his responsibility for the past four years. “You often see quants underperform in periods of volatility,” he says. “But that doesn’t mean that their models are flawed. You see the comments about there being too much money in the same strategies that pop up whenever you get that volatility. But quants trade off behavioural biases that are ingrained in the human psyche. They’re unlikely to go away any time soon.”