What is Quant(?

Quant is a compound of two English words.

Quantitative ), measurable (
Analyst )分析师(

In other words, it implies the meaning of 'quantitative analyst'.

The term quant is used in two meanings: people and methodology.

A person who develops investment models using knowledge of mathematics, statistics, and programming.
The role of designing quantitative rules and algorithms that exclude emotions.
A method of developing and executing investment strategies based on quantitative data, statistical models, and computer algorithms. Mechanical trading method.

Ultimately, Quant refers to a person who develops investment strategies and analyzes markets using mathematics, statistics, and computers, or it refers to the quantitative investment methods themselves.
In simple terms, it means 'someone who analyzes through numbers.' Literally, it means that it competes not through feelings but solely through numbers.

So who exactly seeks to pursue quant investment?

1. Hedge Fund )Hedge Fund(
Key players: Renaissance Technologies, Citadel, D.E. Shaw, and other large quant hedge funds.
Objective: Pursue absolute returns and generate ultra-short-term high profits.
Role: Employing the most aggressive and cutting-edge quant strategies in the financial sector.
Algorithm Trading)AT(: Computer-based automated trading execution, including high-frequency trading)HFT(.
Statistical Arbitrage): Analyzing vast amounts of data to identify short-term inefficiencies for profit.
Features: Composed of PhD-level personnel in mathematics, statistics, and financial engineering, it has a high-cost/high-return structure.

2. Asset Management Company (Asset Management Company)
Key players: BlackRock(, major domestic asset management companies) such as KB, Shinhan, Mirae Asset, etc('s quantitative management division.
Purpose: To manage customers' assets such as mutual funds, ETFs, etc. to achieve stable performance.
Role: Using quant as a tool for streamlining the investment process and risk management.
Quantitative Modeling: Development of quantitative models for corporate valuation and stock selection ) quantitative investment (.
Portfolio management: A system operation that seeks to achieve excess returns over the benchmark while minimizing risks such as MDD of the fund.
Features: Unlike traditional investment departments, decisions are made based on objective figures, excluding emotions.

3. Investment Bank )Investment Bank( and securities firm
Key players: Trading and risk management departments of major investment banks such as JP Morgan, Goldman Sachs, and Morgan Stanley.
Purpose: Providing market liquidity ) market making ( and risk management.

Role:
1. Trading: Pricing complex structured products in the derivatives or bond markets and hedging risks.
2. Strategy Proposal: Develop and advise or propose investment strategies based on quant models targeted at institutional clients.

Conclusion: In the financial sector, quantitative investment is led by hedge funds as the most aggressive strategy, while asset management firms use quantitative techniques as a core component for stable asset management, and investment banks utilize them for risk management and product design.

Where is a place that does not seek quantitative investment?

The entities in the financial sector that primarily do not pursue quantitative investment) and metric investment( are groups that focus on qualitative) and human judgment in their investment.

The main subjects are as follows.

1. Traditional value investors and asset managers

Investment philosophy: It is the area that is most opposed to quant. It analyzes factors that are difficult to measure perfectly with numbers, such as the company's financial statements, the qualities of its management, market dominance, and intangible assets, to assess the intrinsic value of the company.
Objective: To buy undervalued stocks relative to their intrinsic value and hold them for the long term until the market recognizes that value in order to pursue profits.
Representative examples: the investment methods of masters like Warren Buffett and Benjamin Graham.
The role of quant: Quantitative analysis can be used as a 'tool' to quickly filter traditional financial indicators such as PBR and PER, but the final investment decision relies on the 'qualitative judgment' and 'human insights' of the fund manager.

2. Purely discretionary ( Discretionary ) macro fund manager

Investment Philosophy: Predicting direction based on human insights into macro factors such as economic, political, and social conditions (Macro).
Objective: To profit by betting on significant changes in global interest rates, exchange rates, and commodities.
Role of Quant: The quant is used as a supplementary research tool to organize data and validate hypotheses, but the quant model itself is not the entity that executes trades. The fund manager's discretion ( Discretion ) holds the final decision-making authority.

3. Small individual investors and professional investors (traders)

Investment Philosophy: A preference for short-term trading based on unclear investment principles, technical analysis chart patterns(, rumors, and psychological factors.
Reasons for avoiding the role of quant:
Accessibility/Cost: In the past, quantitative investing required high costs and a large number of personnel due to the need for data collection and programming skills)coding(, making access itself difficult.
Psychological factors: Quant strategies must be executed according to established rules and left unattended during periods of no profit, yet many individual investors cannot overcome emotional impulses and deviate from the strategy.

Summary: Quantitative investing is centered around 'data and rules,' which is why traditional value investors or discretionary macro fund managers, who prioritize 'human insights, corporate value, and psychological judgment' in their investment decisions, do not typically pursue quantitative investing as their primary method.

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