Insights
Quantitative InvestmentsSystematic investing: demystifying the science behind smarter portfolios
Quant investing harnesses data, technology and disciplined processes to deliver consistent, transparent and adaptable outcomes. Here’s how we approach the science behind smarter portfolios.
Author
Nick Millington
Head of Systematic Index Solutions
Duration: 2 Mins
Date: 29 Oct 2025
Systematic investing—often called ‘quant’ investing—is not just about algorithms or complex mathematics.
For us, it means applying a measurable, systematic and rules-based process to investment decisions, so that outcomes are driven by evidence rather than emotion.
The aim is to make investing more objective, repeatable and robust—especially in volatile markets where human judgement can be clouded by fear or greed.
Quant teams build models that assess drivers of stock returns, such as company earnings, market trends and social sentiment. These models are designed to spot patterns, identify opportunities and manage risks—minimising the influence of human bias.
Quant strategies follow a disciplined process. Rather than relying on gut feeling or intuition, teams use transparent and systematic methods to select investments.
This so-called ‘glass box’ approach means investors can see exactly how decisions are made and where risks and returns originate.
The aim is to make investing more objective, repeatable and robust—especially in volatile markets where human judgement can be clouded by fear or greed.
What is systematic investing?
At its core, systematic investing uses data, mathematics and technology to analyse vast amounts of financial information.Quant teams build models that assess drivers of stock returns, such as company earnings, market trends and social sentiment. These models are designed to spot patterns, identify opportunities and manage risks—minimising the influence of human bias.
Quant strategies follow a disciplined process. Rather than relying on gut feeling or intuition, teams use transparent and systematic methods to select investments.
This so-called ‘glass box’ approach means investors can see exactly how decisions are made and where risks and returns originate.
How does it work?
For example, we score every stock in the markets that we cover based on sensible economic rationales, or factors, such as:- Value – is the stock attractively priced?
- Quality – is the company well managed and financially sound?
- Momentum – is the stock trending positively in the market?
Our model ranks all stocks, then builds a portfolio that overweights (gives a larger proportion of capital versus a benchmark) the most attractive and underweights the least.
This process is repeated regularly—often monthly—so that the portfolio adapts to new information and changing market conditions.
This process is repeated regularly—often monthly—so that the portfolio adapts to new information and changing market conditions.
Why is quant investing gaining traction?
Several trends are driving the rise of quant investing:- Data explosion – the volume of financial data available today is staggering. Quant models can process and analyse this data far faster and more accurately than any human.
- Demand for value – investors want more for their money. Quant strategies, particularly ‘enhanced index’ funds, offer the potential for better returns than passive index funds, but at a lower cost than traditional active management.
- Consistency and transparency – in a world of unpredictable market shocks, investors value strategies that are systematic, repeatable and easy to understand.
Where are the opportunities?
These opportunities are not just for Wall Street’s elite. For example, enhanced index strategies offer:- Rules-based index solutions – funds aim to outperform standard index funds by making small, systematic bets without taking on extra risk.
- Customisation solutions – quant teams can tailor portfolios for specific goals, such as sustainable investing, income generation or risk management.
- Dynamic risk management – quant strategies can quickly adapt to new risks—economic shocks, geopolitical events or regulatory changes—by rebalancing portfolios and updating models in real time.
- Global reach – quant models can be applied across regions and asset classes, offering diversification and new sources of return.
"Funds aim to outperform standard index funds by making small, systematic bets without taking on extra risk."
Is quant investing right for you?
Quant investing is not about replacing human insight—it’s about enhancing it. By combining disciplined, data-driven models with the experience of seasoned investment professionals, quant strategies can provide:- Consistent, risk-adjusted returns
- Transparency and control
- Cost-effective access to sophisticated techniques.
As the investment landscape evolves, a quant-driven approach is poised to play an even bigger role in building portfolios.
Whether you are an institutional investor seeking an edge or an individual looking for smarter ways to grow your wealth, now may be the time to take a closer look.
Whether you are an institutional investor seeking an edge or an individual looking for smarter ways to grow your wealth, now may be the time to take a closer look.
