Top Goldman Quant: Quant Trading Is Dead

Robert Litterman, Top Goldman Quant

Many of the traditional quant strategies do not work anymore, the top quant at Goldman Sachs told a conference in Paris today.

“You have to adapt your process,” Robert Litterman, managing director and head of quantitative resources for Goldman Sachs Asset Management, said at the Quant Invest 2009 conference, according to Reuters. “What we’re going to have to do to be successful is to be more dynamic and more opportunistic and focus especially on more proprietary forecasting signals … and exploit shorter-term opportunistic and event-driven types of phenomenon.”

Reuters reports:

Computer-driven hedge funds must hunt for new areas to exploit as some areas of making money have become so overcrowded they may no longer be profitable, according to Goldman Sachs Asset Management. Robert Litterman, managing director and head of quantitative resources, said strategies such as those which focus on price rises in cheaply-valued stocks, which latch onto market momentum or which trade currencies, had become very crowded. 

Instead he said opportunities could come in areas such as event-driven strategies — which focus on special events such as mergers or restructuring — and catastrophe reinsurance, although he added they can just as quickly disappear.

He also pointed to credit, emerging markets, volatility trading and commodities.

This seems to be fallout from the great quant bloodbath of 2007, when it was first discovered that too many quant funds were following the same quant strategies.

“We’re putting together data that’s not machine-readable, finding databases that haven’t been explored nearly as well as others, identifying linkages across companies and industries and finding patterns in the data that are not as well known,” Reuters reports Litterman saying.

Read the entire thing from Reuters>>
And check out Reuters hedge fund blog for more from the Quant Invest conference>>

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