Quants' Quandary: Crossing the Chasm

Abstract

Contrary to the mainstream media’s portrayal that adoption of quantitative fund investing is widespread, only a small portion of individual and institutional dollars has been allocated to quantitative strategists. The amount of quant-managed fund allocations and the general potential benefits and drawbacks of quantitative investment are described. Results of a survey of more than forty financial advisors and analysts concerning their recommendations on quantitative investment are shared. Everett M. Rogers’ Diffusion of Innovations (1995) model is applied to explain the slow diffusion of quantitative investment. Additional models of innovation resistance are also discussed in order to understand reluctance and resistance to investment in quantitative strategies. Included is management consultant Geoffrey A. Moore’s Crossing the Chasm (2013) model to illustrate where quantitative investment currently lies on the “Adopter Categorization” S-curve. Practical recommendations for due diligence are included along with suggestions for promotion of quantitative investing where appropriate for suitable investors.

Keywords: quantitative investing

JEL Classification: G10, G11