As head of investor relations for Fortress Investor Group, Gareth Henry has been involved in quantitative investing throughout his career. According to Henry, the origins of quantitative investing lie in the first technical traders, who began trading based on market indicators rather than on traditional fundamental factors. Technical traders, who were originally referred to as “technicians,” eventually combined their approach with computerized trading to create what was then called “program trading.”
As Gareth Henry explains, the approach experienced a few well-publicized setbacks. However, it has become ubiquitous and matured into what we now recognize as quantitative investing, or using mathematical calculations to identify profitable trades. This more elaborate form of program trading is what is used by hedge funds and banks to carry out large transactions. In addition, Gareth Henry points out that this quantitative approach is also increasingly relied on by individual investors. He cites one analyst who estimates that a full 90% of market transactions are arrived at using quantitative methods.
Despite the impressive growth of quantitative investing, Gareth Henry warns that it is no magic bullet and is not appropriate for all types of investors. Not only are quantitative methods ill-suited to certain investors, but different quantitative approaches are more appropriate in different situations. One reason for this is that while some techniques may work for a wide variety of scenarios, other quantitative techniques may be more limited in their applicability.
Gareth Henry graduated with a degree in Actuarial Mathematics and Statistics from Heriot-Watt University in Scotland. He parlayed his mathematics education into a career in finance that has two continents. He got his start at Watson Wyatt LLP and later became a director at Schroders. In 2007, he joined Fortress, the first hedge fund to go public on the NYSE, which formed the basis for his career.
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