Quant and quals brave the bear
Monday, 1 December 2008 12:30pm
Quantitative versus qualitative managers - who's been battered worse amid the global financial crisis? According to two industry experts, both have had their share of joy and pain surviving the second half of 2008.
Rohan Walsh, partner and fund manager of qualitative boutique Karara Capital, told the audience of a Russell manager luncheon last Friday that if he could turn back time, Walsh would have pumped his equities portfolio with highly defensive stocks.
It is a sentiment shared by most fund managers and investors, although Walsh is quick to point out that the qualitative boutique has overall buffered the crisis well. Karara has delivered 5.2 per cent returns since its inception in May 2007, but like most of its peers has seen its investments suffer losses particularly in the second half of this year.
"The equities market has been unprecedented," said Walsh. "The outcome has been more extreme than what we expected."
"If I knew what the market would look like I would have portfolios brimming with those type of [ultra defensive] companies today," he said.
But Walsh said Karara is "reasonably well positioned", due to an experienced team and a disciplined, forward looking fundamental approach to their stock selection.
Meanwhile Don Hamson, managing director of quant boutique Plato Investment Management, said that although quant strategies were designed to take the emotions out of investing, highly unexpected sharp market turns - of either direction -meant that their strategies were bound to be somewhat affected by the crunch.
"Traditional valuations have worked quite well… and one of the things we have to be careful is to not switch allocations. We've tested our factors over a number of cycles. Most of the time they work, but not all the time," said Hamson.
Hamson said Plato selected stocks by considering value, momentum and quality.
"Market volatility means there is no shortage of value stocks but the momentum is what's currently lacking," said Hamson.
Karara Capital manages 10 per cent of the Russell Australian Shares Fund, while Plato manages 15 per cent of the Russell Australian Opportunities Fund.
Ruth Liew
This story was found at: http://www.financialstandard.com.au/news/view/24637
Printed: Friday, 12 March 2010 7:00pm