Just based on this investment model, you'll already have figured out that deciding which assets to invest in is crucial. And that's precisely where quant funds differ from traditional hedge funds: Quantitative funds come to an investment decision based solely on data. They create mathematical long-term market models on which decision-making can be based. At the same time, most other hedge funds use fundamental analysis of the assets and human intuition to come to a decision.
In many ways, quants are a new world of investing. Where the "old world" relied in large part on the intuitions and opinions of hedge fund managers making an educated guess, the "new world" uses all of the tools of the digital age, from statistical computer modelling using quantifiable data points to artificial intelligence and machine learning. And with CARL, you're at the forefront of this development.
Here's a simplified example: Imagine you're trying to decide whether or not to invest in your favorite coffee shop. You could talk to the customers to figure out if they like the shop, compare prices with the competition and so on. But ultimately, you may be swayed to buy the place just because you think they make the best coffee in the city, and you're confident this will lead them to success. On the other hand, you might collect data on the median income in the area, look at national trends in coffee consumption, and determine the success rates of similar coffeehouses in the same area over the past 20 years. Your analysis will then give you a hard number on the probability of the shop succeeding in the long run, regardless of what you personally think of their coffee.
The main goal of quant funds is to take human intuition out of the decision-making process when choosing individual investment strategies. But in order to get into quants in the first place, you need to decide which funds to invest in. That's where CARL comes in: CARL identifies lucrative trading strategies, including some hidden gems that might not have been on your radar before, and provides you with all the tools you need to start investing. Open the CARL app and you'll be greeted with a world of carefully selected investment opportunities to choose from. You don't need to be an expert mathematician, a tech-head or an experienced trader. CARL is all of that for you.
Over the past decades, it has become clear to even the most ardent believers in the traditional hedge fund model that quants have a number of significant advantages:
- Their models identify, analyze and value assets reliably and automatically.
- They increase the speed at which the fund can react to short-term market fluctuations.
- They eliminate the potential for human error (overvaluing or undervaluing assets based on intuition).
At CARL, we believe that newcomers should have the opportunity to reap these benefits every bit as much as highly experienced traders with lots of assets already under their wing.
The world of finance has been pondering this very question since the inception of the first quants. In general, quants do best in high-volatility market environments. If you've had bad experiences with managers making the wrong decisions during volatile market periods, you'll be pleased to hear that quantitative strategies can outright outperform traditional funds. That's because they work along long-term mathematical models while also reacting to market changes quickly. At the same time, traditional hedge fund managers may be prone to making bad decisions, especially when volatile markets come into play.
Quantitative hedge funds are solely data-driven, while traditional hedge funds make decisions based in part on the experience and intuition of the hedge fund manager. The question is: Which of these would you rather rely on?
Their low risk, combined with the ability to create gains in situations where traditional funds might underperform are also the reasons why CARL aims to help novice traders get a foothold in quant investing, instead of leaving the field entirely to the already established players. Quants are a 21st century thing, after all – and what could be more in line with the zeitgeist than democratizing access?
Quants offer a world of opportunity with tangible benefits to even inexperienced investors. So if you're looking to diversify your portfolio with quantitative data-driven funds, CARL is here for you. The CARL platform uses advanced algorithms to find the best quant investment opportunities and provides you with all the necessary tools to get started immediately.