“Quants are no different  from any other investor, in that  in order to model a particular  company’s future earnings, you also  have to model its customers and  competitors around the world,” he  said. Kahn did not wish to speak  directly against the prospects of  boutiques performing quantitative  management. It’s a slightly sensitive  point, given his erstwhile colleague  and co-author of definitive quant  handbooks, Richard Grinold, has  recently given private backing to  the start-up of another former  BGI investment executive, Morry  Waked.  However, Kahn did allow that  scientific investing was a “scale  business…four guys sitting around  a Bloomberg terminal in a crowded  room probably isn’t enough.”

Kahn said he had observed US  and European pension funds make  big shifts into passive investing, but  was confident it was a “temporary  retreat”, to be expected given the  volatile state of the markets.  “While average active managers  underperform, successful active  management – scientific and  fundamental – is possible. Nothing  in the financial crisis leads us to  believe that stock prices today  capture value any better than they  did [before].”