I don't quite understand the phrases in bold: "As in 2008 and 2011, we suspect this environment will be challenging for the levered beta riders (aka fundamental [equity long-short] stock pickers) but should be supportive of the quant process driven discipline," Milind Sharma, who manages a quant strategy at his New York firm QuantZ Capital, told Business Insider.


2 Answers 2


"Leverage" here is referring to "financial leverage". This is the practice of "levering" [ie increasing, like the use of a lever to increase the amount of weight you can lift] the value of your investment by taking on debt.

For example: if you have 100k in cash, you can buy a 100k rental property. Assume the property makes 10k a year, net of expenses [10%]. Now assume the bank will also give you a 100k mortgage, at 3%. You could take the mortgage, plus your cash, and buy a 200k rental property. This would earn you 20k from the rental property, less 3k a year in interest costs [the 3%]. Your total income would be 17k, and since you only used 100k of your own money, your rate of return would now be 17% instead of 10%. This is financial leveraging. Note that this increases your risk, because if your investment fails not only have you lost your own money, you now need to pay back the bank.

"Beta riders" appears to be negative commentary on investors who use Beta to calculate the value of a particular stock, without regard to other quantitative factors. Therefore "leveraged beta riders" are those who take on additional risk [by taking on debt to invest], and invest in a manner that the author would perhaps considered "blindly" following Beta. However, I have never seen this term before, and it appears tainted by the author's views on Quants.

A "quant process driven discipline" appears to be positive commentary on investors who use detailed quantitative analysis to develop rules which they rigorously follow to invest. I have never seen this exact phrasing before, and like the above, it appears tainted by the author's views on Quants.

I am not providing any opinion on whether "beta riding" or "quant processes" are good or bad things; this is just my attempt to interpret the quote as you presented it. Note that I did not go to the article to get context, so perhaps something else in the article could skew the language to mean something other than what I have presented.


Translation : Funds managers that use traditionnal methods to select stocks will have less success than those who use artificial intelligence and computer programs to select stocks.

Meaning : The use of computer programs and artificial intelligence is THE way to go for hedge fund managers in the future because they give better results. "No man is better than a machine, but no machine is better than a man with a machine."

Alternative article : Hedge-fund firms, Wall Street Journal.

A little humour : "Whatever is well conceived is clearly said, And the words to say it flow with ease." wrote Nicolas Boileau in 1674.

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