1. How has your work with NASA and other past employers prepared you for this role as Co-Head of QMA’s Quantitative Equity team?
I began my career as a scientist at NASA, where I worked with a lot of smart, creative people. I bring my love for a creative, collaborative environment to the Quantitative Equity team at QMA. My team is encouraged to follow hunches and think independently. Research is rarely a linear process, and often you will discover something other than your original goal. You need to keep your mind open to follow these clues, as they could end up being more important than what you were originally trying to find.
Models govern our quantitative investment process at QMA. However, these models are the result of human-driven research and intelligence. Minds that are resilient and intellectually curious help produce unique insights. A willingness to experiment and the drive to keep trying are characteristic of successful innovators in any industry.
2. What is your overarching goal for the Quantitative Equity team?
My primary goal for the Quantitative Equity team is to help our clients meet their investment objectives, which are typically tied to retirement needs in some form. On a day-to-day basis, this means aiming to deliver consistent investment performance and providing exceptional service to our clients. Consistency is key, because we believe it’s the best way meet a client’s goals. We use a core philosophy to construct systematic investment products that seek to consistently outperform the market over time.
From QMA’s beginnings, in 1975, research has been an extremely sound base on which we’ve built our investment offerings. This continues to be a focus for the firm. We focus on pairing grounded investment insights with data, which allows us to tease out signals that we believe are predictive of stock behavior. Part of my job is to guide investment professionals as they develop new research ideas. At the same time, I am helping to streamline our process from idea to implementation, so we can get our best work into portfolios right away.
3. What changes have you brought to QMA’s investment team and culture?
I am a firm believer in learning and personal development. I am also focused on talent retention, as our clients benefit from a stable base of employees and competition for the best talent is continually increasing. One way in which I seek to improve QMA’s intellectual capital: I give my team room to grow. I consider myself a mentor, rather than a micromanager. Investment professionals under my leadership are given the freedom to contribute in their own way, provided they remain team players within the organization. Diverse opinions are key to a creative environment. The last thing I want is for everyone to think the same way.
When I joined the firm, QMA’s Quantitative Equity team originally functioned as three distinct groups. The US, Non-US and Value teams all had similar goals, but different day-to-day methods of implementation. Their technology was inconsistent, as was their approach to implementing the same philosophy. My first task was to unify these groups from a bottom-up perspective. This entailed changes to personnel, reporting lines and systems. It is my belief that the reorganized Quantitative Equity platform combines the right people with the right skills and the right systems, for more effective, long-term client solutions.
In the old model, investment analysts worked for specific product lines. Each of the three teams hired and trained analysts independently, which limited their career path. I extended their intellectual reach. Our redesigned core analyst pool allows analysts to work on portfolios and projects across the entire Quantitative Equity lineup. They have room to grow. This structure has been well received by both the analysts and the portfolio managers who have more skilled workers to assist them. Analysts particularly enjoy developing diverse skill sets while they gain valuable experience across multiple offerings. In addition to their expanded responsibilities, our analysts now have multiple paths for advancement and they get exposure to many areas of the investment process: research, portfolio management, client service and trading.
I also introduced implementation specialists to the team to coordinate the efforts between Investments and Technology. Our implementation specialists are trained software developers who assist in providing a flexible framework, so our analysts and portfolio managers can focus on core investment algorithms.
The role changes I instituted helped clarify responsibilities for members of the investment team. These changes also greatly reduced the time portfolio managers were asked devote to non-core duties, such as personnel management, non-investment coding and administrative tasks. Portfolio managers are now free to focus more of their time and skills on the actual management of investment portfolios, which is the way it should be.
4. How has QMA’s investment platform improved since your tenure?
As long-term investors, we believe in staying the course through full investment cycles. Yet we must also operate at today’s rapid pace. My focus on efficiency and interconnectedness across the firm necessitated role changes across the investment team. We are a more agile team now and utilize many of the same tools used in startups. These changes also positively impacted our clients, as QMA is able to work together efficiently in our search for timely, consistent alpha capture. I am committed to further increasing our team’s effectiveness on the global stage.
The changes we made helped streamline many aspects of research and portfolio management, and have enabled a number of enhancements. We believe that periodic model enhancements are necessary as markets evolve, and constantly research new ways to isolate alpha for our clients.
Some examples of projects begun and/or implemented during my tenure:
- QMA launched its first-ever ETF lineup, which includes International, Large-Cap Core, Small Cap Growth and Small Cap Value offerings. These are active ETFs which leverage insights that are unique for the ETF marketplace. We will continue to review and expand our ETF lineup over time.
- We made several enhancements to our international stock selection models. These enhancements were intended to improve factor efficacy in general, with a specific focus on our quality and value framework.
– We expanded our quality measures of efficiency and profitability with signals, which measure a company’s ability to manage its short-term obligations, as well as its financial health.
– We instituted a new Communication Services sector model.
– We extended our data feeds to include country-specific feeds, which provide expanded coverage and timeliness.
– We rolled out the earnings call factor in the international space. Research into Natural Language Processing techniques began prior to my tenure. This factor, previously implemented in the US, captures insights from unstructured data with rules that can be used to evaluate both generic and event-specific sentiment.
- We recently researched the efficacy of adding top-down insights to global and international mandates in order to take more informed country and industry exposures in our portfolios. This came at the request of a current client, who asked for higher tracking error in a portfolio. In yet another example of collaboration across Investments, the top-down framework we utilized was pioneered by the Global Multi-Asset Solutions team.
- In the near future, we will be completing an overhaul of our portfolio construction engine. Our improved investment platform will be modular, allowing for greater customization of client portfolios to respond to specific client requests, such as the desire to add complex tax management or ESG considerations. This will also help us in our firm-wide goal to meet increasingly individualized client needs in a seamless manner.
5. What new research projects can we expect from QMA?
Our watchword is innovation. Our current research pipeline promises to be fruitful. In addition to the considerable work we are doing on portfolio construction, investment professionals on the Quantitative Equity team are currently spearheading several research projects:
- We are examining the use of valuation spreads in international markets. When valuation spreads are wide, value factors typically have a higher payoff and growth factors typically have a lower payoff. We are researching ways to implement these insights into our portfolios outside of the US.
- We are investigating alternative ways to measure firm valuation and understand when each of these metrics are relevant.
- We are continuing to make our process more flexible, so we can more easily accommodate specific requests for fund customization. Rarely do our clients want standardized, off-the-shelf products. We continue to work collaboratively with clients to provide investment solutions to their most pressing problems.
- We are refining and improving the means through which we can deliver ESG capabilities to our investors in products ranging from absolute return to benchmark-relative strategies.
- We are enhancing our after-tax investment capabilities to address customer needs for investment performance in taxable accounts.
QMA has a long history of producing great research. My strategic plan is to improve efficiency and coordination across the firm, so our innovative research can be shared more easily across different strategies and can be implemented in a timely manner for the greatest benefit of our clients