Formed in 2005, the quantitative investments team manages a diverse range of products including passive, smart beta, and active quant strategies.
We have over 30 quant specialists* based in Edinburgh, London, and Shanghai to provide clients with solutions that are customised to their needs. Using proprietary, rules-based approaches we manage quantitative equity, fixed income and derivative portfolios across all markets.
Our investment process is grounded in academic research and investment theory. We identify sources of excess risk-adjusted returns, test them throughout the business cycle, and use them in our active quantitative portfolios in a systematic, cost-effective, and risk-controlled manner. We are well placed to meet our clients’ requirements, because our in-depth understanding of the individual sources of returns allows us to combine them into effective solutions.
Our quantitative investment strategies include:
- Traditional indexation – matching the returns of conventional benchmarks, such as the FTSE All-Share Index, that are weighted according to the market capitalisation of each company. The process we use to do this is scalable, repeatable and risk-controlled.
- Fundamental indexation – matching the returns of fundamental equity indices. These benchmarks select and weight their constituents based on various factors such as free cash flow, dividends and total sales. Rankings based on these ‘fundamentals’ are used to determine a particular company’s weighting within the index. In particular we manage a range of strategies linked to the FTSE RAFI™ (Research Affiliates Fundamental Index) series providing exposure to the UK, global and emerging markets.
- Enhanced indexation – aiming to generate returns slightly above those of the benchmark, by taking a similar level of risk. Taking an equity index as the starting point, our investment process models themes including value, prudent management, financial strength and others. For each of the themes, we have identified a strong investment rationale or established via back-testing that it is likely to outperform over a business cycle. We then ‘tilt’ the portfolio to the identified theme(s), aiming to produce a consistent, risk-adjusted return.
- Smart beta (SMARTER Beta™) – combining the benefits of active and passive management in a new ‘third approach’ to investing. Smart beta techniques aim to achieve returns above that of the market, or risk levels below that of the market. They use ‘risk premia’ factors (similar to the enhanced index themes above) while retaining the numerous benefits of conventional indexing such as simplicity, objectivity, transparency and relatively low costs. Our SMARTER Beta™ capability aims to achieve both higher returns and lower risk.
- Bespoke products – we also manage a range of tailored derivative and structured products.
* As at 31 December 2019, Source: Standard Life plc, Aberdeen Asset Management PLC