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In 1978, so the story goes, the world’s first investment product reflecting a quantitative model was launched in the US by the former Wells Fargo investment division. It was a simple strategy which tilted the portfolio towards stocks that paid higher dividends. Since then quantitative investment strategies have come a long way, with both the number of quantitative managers and other institutions mushrooming along with the number and variety of strategies employed. In fact, recent criticism of the likely future effectiveness of quantitative strategies tends to centre on their popularity. Some commentators believe that the weight of money making similar bets when the world first felt the tremor of financial crisis in August 2007 contributed to the underperformance of quantitative managers. Recovered ground by those managers since has dampened the debate and the search for new and better strategies has intensified, as has the development of better risk management techniques. This is an edited transcript from a roundtable in Melbourne, sponsored by BNY Mellon Asset Management and its affiliate Ankura Capital, which looked at quantitative investments from the point of view of institutional investors and their advisers.

Participants at the roundtable were: • Ross Blakers, associate director, Access Capital Investors • Kristian Fok, deputy managing director, Frontier Investment Consulting • Matthew Ross, head of quantitative research, Goldman Sachs JB Were • Greg Vaughan, chief investment officer, Ankura Capital • Richard Dalidowicz, senior investment manager, AustralianSuper • Dennis sams, head of public markets, UniSuper Management • Peter Laity, general manager, investments, ESS Super • James Gruver, managing director, BNY Mellon Asset Management Australia • Greg Bright, publisher, Investment & Technology Greg Vaughan: When the storm first hit in August 2007, it was easy to say that the situation in the US was an extreme circumstance, leverage was a big part of what had happened and there was some contamination from the sub-prime crisis.

At that point there had been not a lot of disruption to Australian quantitative returns. If you wind the clock forward those 18 months, as a general statement the quantitative managers have been about a quartile behind the balance of other managers. Even in Australia there has been a differential that has emerged over that period and there are a number of nuances of that. When you look at how firms have performed over those 18 months, there’s a suggestion that US-aligned processes have struggled more than locally-derived processes.

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