John At The Center

Even after the broad market rebounded strongly in 2009, many quant funds continued to struggle. This time, a central problem was momentum models, which didn’t steer quants into economically sensitive stocks in time to catch their powerful rally.

By that time, many investors had lost faith. Harvey Rowen, chief executive and chief investment officer at Starmont Asset Management LLC, in mid-2009 dumped a couple of quant funds from client portfolios that were trailing the market. He now allocates roughly 4% of client portfolios to quant funds, down from about 12% previously. One concern is that some quant models are based on a rather stagnant view of the world, “and when the world changes, the computer doesn’t know that,” Mr. Rowen says.

via Computer-Driven “Quant” Funds Seek To Become More Human – WSJ.com.