It is likely more and more traditional quant equity players will move into the quant credit space and use the sophisticated models and data management techniques they have deployed in equities to generate alpha in credit. Not all will come to pass, but a few things appear highly likely from our vantage point as early participants in this fast-developing market.įirst, it will be a future of increasing data sophistication and the use of machine learning. This article will explore several possible iterations. With the market still in its nascency, there are numerous potential paths for the strategy class to follow. It is a fascinating time to consider how quant credit will evolve in the decade to come. This growth looks set to continue and it is likely that quant strategies will increasingly come to dominate the credit markets. With the rise of electronic trading and settlement in credit, this impediment has fallen away and the past few years have seen volumes in quant credit grow dramatically. Quant credit has been slower to take off than many expected, largely owing to the over-the-counter nature of trading and the consequent lack of deep pools of data (which quant strategies require to function efficiently). For example, quant equity funds are burgeoning in China and in new asset classes, particularly credit. This is a trend that is playing out across different markets. The balance was in quantitative investing styles (through a combination of exchangetraded funds, which are essentially passive quant investing, and more than one-third by funds pursuing more active quantitative investing mandates). In 2019, less than a quarter of the more than USD30 trillion of US equities was held by human-managed funds. The past several decades have seen quantitative strategies established as an important feature of global equity markets. This article was originally published in IPE on 1 October 2021.
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