We founded First Quadrant more than three decades ago with a vision for a better way to invest. Systematizing the application of sound investment insights allowed us to avoid the common behavioral and emotional errors in decision-making. We brought science and discipline to investment management.
Never a traditional “quant”, we were always focused on uncovering deeper, conceptual insights about how markets work rather than looking for the appearance of statistical patterns in the data. By applying a systematic approach to the kind of fundamental and economic insights sought out by fundamental investors, we gained an investing edge.
Over time, we learned that while systematizing our ideas came with strong advantages, too academic a perspective could distance oneself from the day to day realities of the markets. Coupling our academic orientation with that of the practitioner by applying a modest degree of discretion, we came to develop new insights more quickly, better manage the risk of our portfolios and enhance our clients’ returns. Putting to work our deep understanding of what makes our models work allowed us to navigate through the market and economic conditions that impact the effectiveness of our models.
Our vision for a better way to invest included a commitment to providing strong, successful alternatives to what was commonly and conventionally available elsewhere. That required that we unearth insights that other investors had failed to spot by questioning what might otherwise seem known and digging deeper. Innovation rarely occurs without some form of friction, irritant or need. By causing serious minds from diverse backgrounds in finance, science, and mathematics to work together, we cultivate a cognitive friction that leads to uncommon insights. We do not think alike, share the same assumptions, nor address questions in the same way. This provokes the kind of innovation that results in true alternatives for our clients.
So what does our future look like? That has everything to do with what asset owners need. Clients today are looking not just for added return in their portfolios, but returns that carry other specific characteristics. Many are looking for return streams that legitimately provide diversification to everything else they have in their portfolios. Protecting against downside risk, generating more yield, improving after-tax returns, and being prepared to protect against either inflation or deflation are important concerns as well. As we move forward into the future, it is our goal to bring our best insights to bear on solving these needs, in ways that represent truly alternative and diversifying forms of solutions to what investors can readily find elsewhere.