Quantamental Investing: A Brief Primer on KCR’s Toolkits
At KCR, we believe in the Quantamental Investment approach–a strategy that leverages the most useful aspects of both quantitative investing and fundamental investing.
Below, we detail our strong belief in the quantamental investment strategy and show why KCR’s models– which we have been meticulously building and improving since 2010– are relied upon by some of the world’s leading institutional investors and asset allocation firms.
What is Quantamental Investing?
First, we have to define quantitative investing and fundamental investing.
Quantitative management involves using large portfolios of stocks that are rebalanced at predetermined intervals with the goal of exploiting alpha, or excess return, using various factors or alternative data. Building on work done by Joseph Lakonishok, the legendary professor of behavioral finance and a founder of LSV, our white paper The Persistence of Profits offers compelling evidence based research on the power of mean reversion in factor-based investing.
This is a clear departure from Fundamental Investing, the more traditional approach, which involves evaluating the quality of a company based on projected future cash flows and various qualitative factors. Note that KCR understands the importance of the fundamental approach – see our recent post on speculative trading for a transcribed presentation from Peter Lynch, who champions the fundamental approach.