We are in the days where computers and automated systems are simplifying processes and transactions all over the world. As with all sectors, the financial world has joined other sectors using technology to streamline its operations and transactions.
Quant hedge funds are the result of the evolution of technology. Forget about the traditional hedge funds that rely on their employees’ manual input or analysis. Quant hedge funds rely on computer programs to analyze data. They invest algorithmically.
Quant trading relies on systematic or automatic trading. The quant funds base their investment decisions on mathematical models that are systematically and statistically analyzed. This automated data analysis makes it easy to predict market trends and identify profitable investments opportunities.
Due to the algorithmic nature of their investments, quant trading is more profitable, accurate, reliable, hassle-free, and more time-conscious (they happen in real-time).
Before we hop in, it is worth noting that the firms I lay out here are some of the best in the world – however there is one problem. Access to quant funds and quant trading is usually confined to a small group of high net worth / educated elite. Retail investors normally have very little access, we created Aikido Finance to give everyone access to quant investment strategies.
Now that you know about quant funds, let’s look at the top quant funds in the world you can invest in, here they are;
D. E. Shaw
With over 30 years in trading, D. E. Shaw is a hotshot in the quant trading world. Known as a pioneer in quant funds, it manages the investors’ assets or hedge funds by trading stocks that balance risk and returns.
How does D. E. Shaw balance the scales of risk and investment?
D.E. Shaw employs many quant trading strategies to generate significant returns on its investments.
- It trades in many capital markets worldwide
- It invests in diverse asset classes
- It invests in different financial instruments and companies.
- It invests in many emerging markets and powerful industrialized nations.
When identifying profitable opportunities, D. E. Shaw analyses different data sets associated with thousands of financial instruments. It collects this data from other countries and covers many asset classes. D. E. Shaw doesn’t only use mathematical or quantitative models. It also uses human expertise to make informed investment decisions.
Once the data analysis yields a new predictive model, D. E. Shaw uses this data to make profitable investments. It re-optimizes its portfolios continuously to efficiently manage any change in risk and utilize any new profit opportunities.
D. E. Shaw bases all its decisions on real-time data. It also trades 24 hours a day, executing tens of thousands of transactions a day.
If you want to make private or venture capital investments, you need not worry. Two Sigma offers a range of quant trading options for both situations. Every investment choice has a substantial rate of returns.
Two Sigma uses process-driven quant trading strategies to make a profit in its investments. It does this by using statistical models that it develops using rigorous mathematical analysis and industry insight. Two Sigma uses these models or strategies over several markets and asset classes to predict and invest in profitable market opportunities.
How does Two Sigma consistently stay on top of its game?
To consistently and successfully identify, quantify, and act on market opportunities over a large number of markets while mitigating the risk, Two Sigma has invested in computational resources.
Two Sigma bases its strength on technology. For this reason, this quant hedge fund employs small teams that develop and continuously improve its analytical and measurement tools for financial markets.
And to further its accuracy in data analysis tools, Two Sigma is always looking for collaborations within the financial world.
Bridgewater Associates is a top-performing quant hedge fund founded by Raymond Dalio.
Bridgewater is a trading guru that uses quantitative analysis when choosing the right stocks (new stocks) for investment.
Because of its trusted reputation, many investors use Bridgewater Associates to secure their futures. And because of this, it manages a quant fund of over USD 230 billion in assets.
Its stock portfolios include large companies like Walmart, Alibaba, and Procter and Gamble, as well as smaller names.
If you are looking for a quant hedge fund that delivers consistent investment returns, Citadel Advisors is an excellent choice for you.
Founded by Kenneth Griffin, Citadel Advisors is a Chicago-based quant trader that has grown to manage over USD 230 billion of assets successfully. It combines vigorous research and complex quantitative analysis to ensure its consistency in investment results.
It manages funds using five investment strategies; fixed income, equities, quantitative strategies, credit, and commodities.
To manage risk, it employs risk management strategies focused on three areas. And these are capital exposure, liquidity management, and risk capital allocation.
Citadel Advisors is capitalizing on its profit-making opportunities by diversifying its stock or investment portfolio to increase its returns on investment. One of Citadel’s winning investment decisions was heavily investing in the Amazon stocks. Amazon’s consistency in growth and profitability has improved and played a significant role in the steady rise and profitability of the Citadel quant funds.
Renaissance Technologies (Medallion Fund)
Considered one of the best quant funds globally, Renaissance Technologies combines mathematical analysis and quantitative modeling (both mathematical and statistical methods) to discover new and existing profit quant trading opportunities across diverse markets. Due to this, it yields high returns for its clients. Starting in 1988, Renaissance’s flagship Medallion fund has famously racked up average annual returns of 66%!
Why should you invest with Quant Hedge Funds?
We cannot finish this article without giving you reasons to invest in quant funds. Here they are;
- Higher return on investments
- Data is analyzed more quickly based on real-time up to date information.
- Investment decisions are made more quickly
- Better predictions of risk and returns.
- It reduces the risk of human error
Or, you could do it yourself
As mentioned before, the firms discussed here here are some of the best in the world. However, access to quant funds and quant trading is usually confined to a small group of high net worth / educated elite. Retail investors normally have very little access.
With Aikido Finance, you can create your own quant/algorithmic portfolio in 3 easy steps:
- Integrate/connect your broker with Aikido
- Select a strategy
- Create a portfolio and the trades are sent straight to your broker!
Quant funds or quant trading is the way to go. To start trading, research each quant trader in-depth and find one which one aligns with your investment goals. Want to know more about quantitative investing? read these books.