The way quant funds approach risk is misunderstood - George Mussalli

George Mussalli is the Chief Investment Officer of Boston-based quantitative fund PanAgora - he was visiting Australia last week to meet with the investor, research and investment consulting community.

He argues that misunderstands the way quant funds approach risk. George Mussalli stated that PanAgora is built to withstand periods of high volatility by being uncorrelated to broader market moves. PanAgora focuses on removing market and systemic risk:

• "Our goal isn't to take a position, simply to determine that the risks in investing in energy are greater now than it has been in the last 10 years."
• "We need to be in front of the risk models, because they look at the last 10 years to describe what is going to happen."
• "So you have to know what you can predict and what you cannot predict. Such as JetBlue [US airline] has better on time arrivals than SouthWest that's a good thing to bet on, so we look for thousands of those types of things."

The fund's strong returns were based on "avoiding the crowded trades":

• "We don't have common bets and positions that most of other firms have."
  
• "We are trying to achieve a high hit rate on a monthly basis and not correlate with any type of market environment."
  

By the way, Australian funds management group Pengana Capital announced new distribution partnership with $50bn global quant leader PanAgora Asset Management.