Quant Fund

Ooooh...alllll-gooooo-rhythms…Say it with us, people…algorithm. Maaaaaath. Black boxes. Spooky numbers.

A quant fund is an investment fund, usually hedged or with elements of hedging, that relies solely on the math of everything. They don't care much that toothpaste is now being used for crows feet abatement. And that there is a 5-year bullish trend for Colgate.

They don't care that Tesla is dominating the world with electric cars, and that gasoline will likely be obsolete in a few decades. And they don't care that people are living longer, so life insurance companies have a tail-wind behind them, because insurees will be paying those premiums 17 more months in the future before they croak.

All quant funds care about is the math of the math.Typically, a quant fund builds its own proprietary, complex, math-laden models, which automatically trigger a series of trades at any given moment in the trading day, hoping to benefit, even in small ways, from what are essentially arbitrage opportunities, or theoretically riskless trades, that can be made, taking advantage of mixed pricing in the market.

Quant funds, as they are now classified as an alternative investment in the same vein as hedge funds charge the same exorbitant fee structure, and because they do such vast volumes of trading, that is, something like ⅓ of all U.S. stock trades derive from quant fund managers, they give out massive commissions, and have equally massive sway with the brokerage community.

And, uh, you’ve probably seen myriad ads on TV for their funds. Yeah, math. It does a body good.