Quant investing is a method by which investment decisions are made based entirely on the recommendations of a computer algorithm that has been fed with massive amounts of quantitative data and trained via machine learning. This means that technically, any investor can build their personal portfolio with quantitative investing principles. However, the term is mainly used for "quant" hedge funds, as these typically have better access to the technical know-how to build their own custom-made machine learning algorithms and feed it the necessary data.
This is also the main difference between quant strategies, such as the ones available at CARL, and the investment strategies employed by other, more "traditional" hedge funds:
- Quant funds use complex computer modeling and quantitative analysis to make investment decisions
- Traditional funds rely at least in part on the intuition of their managers
Hedge funds have always been an investment vehicle that's willing to balance a greater level of risk with the significantly greater returns it can produce compared to traditional investments such as investments in stocks or bonds. In part, this greater risk stems from the fact that their employees evaluate potential assets and make investment decisions based on those evaluations. Since these employees are human and humans often make mistakes, these evaluations may end up being wrong, cutting into the fund's overall gains. Quant strategies don't have that problem since they use algorithms that, ideally, are infinitely smarter than human employees and, also ideally, have been fed a wealth of data to use for the decision-making process.
While the data-driven approach of CARL's quantitative strategies certainly minimizes the risk of human error, there is still some risk associated with it. Quantitative funds base their decisions on algorithms that are fed raw data – and both the programming of the algorithm as well as the feeding of data is done by human employees. In short: A quant is only as good as its algorithm, and the algorithm is only as good as the people who program it.
While quantitative strategies are not entirely without risk, they are often seen as much more reliable than traditional hedge funds – especially in times of high volatility on the market.
The process by which quant funds limit risk is called "backtesting". Once an algorithm is advanced enough, it is fed readily available historical data from a time in the past and asked to make investment decisions based on that data. Since we know how certain investments have turned out in the years to come, the programmer can then check the algorithm's performance against this historical data. Only if the algorithm consistently manages to outperform the market in these test environments will it be used to develop a quantitative investing strategy that's implemented in real life.
Figuring out which strategy to invest your money in isn't an easy task – ideally, you'll want to have profound knowledge of how the fund is designed to work and what talent is behind it. The situation with quants is similar, though, with these funds, you'll also want to have a basic understanding of computer science to know which algorithms are the most sophisticated.
CARL makes quantitative investing easier than ever before – no previous experience required!
Luckily, with CARL, you won't need any of these things. CARL is a comprehensive all-in-one app to find promising quantitative investing strategies and invest in them – as easy as pie. CARL's due diligence processes ensure that only the most promising and trustworthy investment funds become part of our portfolio to save you the trouble of examining all available strategies individually. The CARL app also provides you with valuable data such as historical performance graphs and the annualized volatility of our quants. That way, you have all the important information right in front of you when you decide to invest.
All of this is in line with CARL's primary goal: Providing access to some of the most sophisticated quantitative investment strategies available on the market, without the hurdles you usually have to go through to succeed. Historical data has shown that quants typically outperform other types of investments, both in bull and bear markets – and we want to bring this "power of quants" to individual investors. After all, quantitative investment opportunities are too precious to leave only to the uber-rich.
Quant hedge funds are data-driven, technology-based investment strategies fit for the 21st century. Take a look at CARL's quants and you'll find out why we can confidently offer 15%+ targeted returns, a low $20,000 minimum initial investment level and withdrawals with no lock-up periods. CARL is here to give you access to some of the most sophisticated quant investment strategies currently on the market.