Economic theory is based around the idea of the rational actor – but ample evidence shows that investors are susceptible to doubling down after a loss, or herding towards the overpriced, trendy security of the day. Toby Warburton explores the predictable unpredictability of investors, and how the Active Quantitative Equity team aims to exploit the market inefficiencies that result.
Meet the Team
"Many people think equity investing is all about finding companies that offer the best returns. We’re focused on the best way to form equity portfolios to deliver the best risk-adjusted returns, in line with the investor’s specific return and risk objectives. Our expertise is in applying our investment knowledge across as many companies as possible in a highly objective way."
Chief Investment Officer, Global AQE
"Quantitative approaches are relevant to investors who are interested in taking full advantage of the potential of very rich, very diverse universes of companies, such as emerging-markets (EM) small cap. Arguably some of the most attractive companies in emerging markets sit in the small-cap category. In addition, equity returns for EM small-cap firms have historically been less volatile compared with EM large-cap, because the small cap category is more diversified. A quantitative approach can give investors access to some of the smallest-cap companies in the category, expanding the universe of potential investments, which we believe improves our ability to generate risk-adjusted returns."
Chief Portfolio Strategist; global head of the equity-portfolio strategist team
"Markets are inherently inefficient, and we’re able to go wherever we believe we can take advantage of those inefficiencies. In our Global Defensive Equity strategy, for example, we don’t start off by limiting ourselves to a low-volatility, defensive universe, and then seek to pick the best stocks within that limited universe. In our mind, that’s not optimal. We’d rather consider investment opportunities across the entire universe so that no stone is left unturned."
Managing Director of State Street Global Advisors and a senior portfolio manager for the AQE team
"Confucius said that real knowledge is knowing the extent of one’s ignorance. 'Ignorance' is a strong word, but in our world of investing or active money management, there is an enormous amount of uncertainty where investors can be wrong a lot. For us in AQE, it’s about working to stack the odds in our favor, so that when we are wrong, we are wrong a little less often."
Vice President of State Street Global Advisors and AQE portfolio strategist