This decision has also been made by the $18 billion REST, a JANA client, which has terminated all of its quantitative Australian equity exposure and marginally reduced its international quant exposure. This decision followed some “lengthy introspection” about the role of quant strategies in the portfolio, says Damian Hill, CEO at the fund. Even though REST believes quant has a place in its domestic equity portfolios, it also has a time. “We don’t think the time is in the current environment. Many [quants] were whipsawed by the financial crisis,” he says. “While there are these macro factors that swamp their underlying signals, now is not their time to be in the fund.” Quants don’t have any lifethreatening problems, reckons Lazard’s Prugue. “My beliefs in quantitative management haven’t changed. My criticism of how we place quantitative managers has changed. “In the past, asset consultants used to have value, core and growth managers – and then another bucket called ‘quant’,” the former researcher says. “Just as there are many different styles of fundamental, there are many styles of quantitative.

“If there is a differentiator for quants, it is not the word, ‘quant’. The inputs that go into quantitative mechanisms differ just as widely as in the fundamental world. “Lumping them together because they have an F9 button is not a realistic way of categorising their products.” The crisis has brought an end to investing in quant purely to diversify from fundamental equity strategies, says Towers Watson’s Dougherty. “Will we see allocations to quant for the sake of quant? I think not. But if you’re offering something better than the market, you’ll show up on the radar.” Sunsuper spares itself the trouble of deciding how to deploy quant managers in its equity portfolios: besides a hedge fund mandate with GMO, the big fund doesn’t invest quantitatively. “Talk to quants,” Hartley says. “They say they’ve got proprietary models, but by and large the factors and models are pretty much the same from one manager to the next.”

This becomes dangerous if quants believe, to any substantial extent, that they are alone in following signals. “They’re effectively betting on the probability they can be quicker than others. The danger is, the smart people are looking at the next level and can predict what other quants are going to do and taken advantage of that.” The recent criticism of quants is not the first time that Don Hamson, managing director at the boutique Plato Investment Management, has been forced to defend his trades. The questions he has fielded since August 2007, when the performance of quantitative managers fell more or less in unison – ‘What happened with quants?’, ‘Why did they get it wrong?’, ‘Is quant dead?’ – were put to him during the last period of investor disillusionment with mathematical models, the recession of the early 1990s. But this time, quants have underperformed for longer. “The question is: are our models broken, or is it a cyclical issue?”