- Antonia Lim is Head of Quantamental Investments at Schroders, a department that combines quantitative investment techniques with fundamental analysis, leveraging both machine and human insights to make decisions.
- In a Q&A with Business Insider, she told us why investments must deliver “societal purpose,” where she expects the next developments in asset management will come from, and how the pandemic is changing the industry (and her life).
- Because of her work, Business Insider named Lim to our annual list of the 10 leaders transforming investing in Europe.
- Visit Business Insider’s Transforming Business homepage for more stories .
When it comes to making investment decisions, many money managers are divided on whether to stick with the “old-school” tactic of trusting their gut, or whether to follow a newer generation of investors in letting computers decide for them.
Schroders, the Â£500 billion British asset manager, decided to merge those worlds, and last year hired Antonia Lim to bridge the divide. As head of “quantamental” investments, Lim uses both broad quantitative data and deep qualitative analysis from her (human) colleagues to make decisions.
Before joining Schroders, Lim â€” who was featured in Business Insider’s T-100 Investing list this year â€” spent nearly a decade at Barclays, where she was responsible for global quantitative research. She has extensive experience merging quantitative methods with macroeconomics and even behavioural finance.
Her expertise feels especially relevant as the investing world continues to digitize, and as the Covid-19 pandemic brings new attention to the machine-vs-human debate across the industry. In a Q&A with Business Insider, she told us why investments must deliver “societal purpose,” where she expects the next developments in asset management will come from, and how the pandemic is changing the industry (and her life).
Transcript has been edited for clarity and length:
Business Insider: Can you start by explaining how quantitative investing is different from fundamental investing?
Lim: Quantitative investors build models using fundamental, market, or alternative data to make systematized investment decisions, from security selection to position sizing. Fundamental investors, also known as discretionary investors, tend to make each and every investment decision themselves.
Typically, quantitative investing looks at a breadth of data or complex patterns while fundamental investors delve deep into a more limited number of macro themes or securities.
Business Insider: How do you bridge the two? I mean, how does that actually look in your day to today work â€” are you spending half your day looking at quant data and half your day combing through fundamental analyses?
Lim: I spend my day understanding how to use Schroders’ wealth of market-leading investment resources in ways that will ultimately benefit our investors, using our fundamental managers’ investment processes, proprietary sustainability data, and latest techniques in quant.
For example, qualitative analysis can uncover connections between individual securities, scenarios, and situations to bring depth and understanding, while quantitative approaches can expand this insight through the ability to create models and patterns and apply them to a much larger set of investments to gain breadth, diversity, and different exposures.
I [also] aim to uncover valuable information and data points, and identify effective ways to harness them. This means I spend a lot more time speaking with people than perhaps typical quant managers, and a lot more time looking at stats than fundamental managers. Added to this is a big dose of creative design to bring them both fruitfully together!
Business Insider: The finance industry in general has been moving towards digitization and electronic solutions for years, and the pandemic has accelerated that, bringing fresh attention to the machine-vs-human debate. How does that tension between old and new play out within investing strategies?
Lim: Markets are a reflection of the world we live in and are therefore still very much about human interaction. The world will always be uncertain and people need to go â€” in both their models and analysis â€” beyond the consensus view. We also need people to ensure investment becomes increasingly focused on delivering societal purpose, beyond risk-adjusted returns. To make that a reality, we will need to ensure our investment models, and the way in which we use data, deal with increased complexity.
Business Insider: Is it too bold to say that quantitative investing is the future while fundamental investing is the past?
Lim: For the foreseeable future, humans will continue to have a whole range of insights into the world that computers won’t. So fundamental investing â€” the direct input of human analysis or decision-making â€” is here to stay.
What is changing is both the sophistication of pure quant strategies and (my particular focus) the ways in which humans and computers can interact and build on each others’ strengths. Clients increasingly expect [us to use] quant techniques and data insights together with the human interpretation of complex investment and social implications. Therefore I believe the space between pure quantitative and fundamental investing will become a smoother spectrum, rather than one dominating the other.
Business Insider: In fact, some quant funds have been struggling since the pandemic â€” why is that? Is it that quantitative analysis involves using past information â€” historical data â€” to make projections about the future, while the pandemic has changed the rules of the game?
Lim: The two biggest reasons why some quant funds have gone through a challenging period since the pandemic are the continued underperformance of cheap stocks and the continued outperformance of very large stocks. Together, these effects have caused some real problems for quant strategies. But, at the same time, we know that quant strategies do go through these periods from time to time, particularly the value factor.
The use of past information is really fascinating and one of the genuinely exciting aspects about pursuing quantamental approaches. Computers are great at analysing enormous amounts of past data, as are humans at visualising and assessing sudden regime changes. So pulling those two sources of insight together would really add value in the investment world.
Business Insider: Your background is in pure quantitative investing, right? You spent years at Barclays UK as head of quantitative research. What was it like transitioning to working with fundamental investors as well?
Lim: While long being responsible for quant teams and investment decisions, I have always worked unusually close to other investment specialisms. I love ideas that bring together very different people and knowledge. In the past, I’ve merged quant methods with behavioural finance, macroeconomics, and qualitative security selection to create central investment approaches. These are actually heavily related to fundamental or discretionary investment management.
Business Insider: You’re part of Schroders’ Systematic Investments team â€” which already manages at least $US9 billion for mainly institutional clients â€” and when you joined last year you were one of a number of high-profile hires for the team. Does that mean that Schroders is planning to move more deeply into quant investing going forward?
Lim: Schroders is very much an active manager and continually at the forefront of looking for new ways to create value for our end investors, including quantitative techniques. Currently SSI manages about Â£19 billion and the broader quant and solutions businesses are responsible for over Â£150 billion. So quant is already a meaningful part of Schroders strategy and will remain so. At the same time, Schroders’ world class fundamental investment teams are incorporating more quantitative insights in their processes.
Business Insider: How has the pandemic affected you? Has London’s second lockdown impacted your work? For example, is it more of a challenge to work remotely?
Lim: I have worked for a number firms that have had effective remote working in place for years. However for many financial organisations, it is less a technology challenge and more of a cultural change. Schroders permanently embraced flexible working earlier this year to support its employees throughout this challenging time.
Of course, it is doable, but undoubtedly harder, to start new relationships virtually and I can empathise with others who have started in new firms just before or during lockdown. The largest real impact on my day-to-day routine earlier this year was the closure of schools and childcare. Young children not only need a lot of attention but are also building core self-beliefs that will stay with them for life. The pandemic will have implications across generations.
Business Insider: And more broadly, how has the pandemic affected the world of finance and investing?
Lim: The pandemic has in some way affected almost all people globally. The welfare, economic and social implications are enormous. Finance is not only a single industry in its own right, but an industry intrinsically linked to all others.
From a technical perspective, the pandemic brought complex mathematical modelling into the public domain. Most quants and data scientists I know across the industry suddenly became prolific readers of technical epidemiology papers, with some developing their own models (and obviously arguing profusely about them).
Perhaps this will be a catalyst to one positive [that] I hope comes from this: greater empathy for each other, and increased attention to the “S” of ESG.
Business Insider: Where is the industry going next? That is, where do you expect the next innovations in finance and investing to come from?
Lim: I think both asset owners and asset managers are taking on more social responsibilities than ever before. Ultimately, these will feed through into all aspects of their investment programs, including their investment objectives.
The real investment outcome for a person is their quality of life. What’s the point in having a very slightly bigger pension pot if you now have to pay a lot more in buying clean water? Perhaps it will change our notion of inflation, and we’ll start discounting future values by quality of life for communities. For this to happen we will see quants working more closely with other specialists especially in social sciences, from healthcare to climate: quantamental if you will!
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