Fintech continues to grow exponentially and the current as well as future impacts technology will have on financial markets is tremendous.
Technological Acceleration – Creating Challenges and Opportunities
From decimalization to the current tick pilot as just two example – the electronification of the markets in the last 16 years has continued to accelerate. Along with this acceleration there have been both challenges and opportunities. One of the great challenges has be how to deal with the increased flow of information whether its pricing data, fundamental data, business news, or other forms of big data. With this specific challenge has come great opportunity to generate profits from effective use of this data as well as the discovery of unique alpha generating insights buried within these data sources. According to Raj Mahajan at Goldman Sachs, quantitative hedge funds and quant trading firms “constitute about 14% of AUM, which has doubled since 2011.”
Quantitative approaches not just for Quants
This growth in quantitative investing has expanded to traditional firms as well with Black Rock and T Rowe offering quantitative based products to their investors. In today’s markets finding data, transforming data into useful insight, and integrating that information into existing trading and risk management processes is not optional. The mere amount of data, the rate at which new capital markets data is created and the speed with which that data must be acted upon dictates that all firms apply some form of quantitative approach to their investment management process.