French boutique Uncia is to shed its ‘traditional’ asset management approach and transition fully into a quantitative investment specialist to get ahead of significant market changes.
Speaking to Citywire Selector, co-founder Mickael Cohen said the Paris-based firm had undergone a slow move away from long-only investing in recent years and is now aiming to move to become fully systematic.
This move has already seen the company close its Uncia Global Long Short Equity fund, as well as planning to shut down its Global High Growth fund, as it seeks to refresh its line-up with quant-driven strategies.
Cohen said: ‘We had used the traditional long-only stock-picking style for years but we realised that "real asset management", so to speak, is changing and the quantitative element is becoming more and more important.
‘Therefore, we have closed our traditional long-only funds, as we instead decided to launch quantitative, non-discretionary portfolios, which are pure quant, focusing on market inefficiencies and risk premia.’
Cohen said ‘risk premia’ focused investing has accelerated in sophistication in recent years and momentum-led investment decisions have become more prominent.
This, Cohen said, is reinforced by extensive analytical work into momentum around earnings announcements undertaken by fund manager Julien Messias. This showed that psychological, cognitive and behavioural biases could be exploited in a quant model.
However, Cohen added, there remain challenges around perceptions that quant investing is an overly complex investment idea.
‘The challenge quant has traditionally faced is it is viewed as a "black box" and we want to address that. We want to remove the idea it is opaque and make it accessible to investors. This is done by using proven and simple to understand quant models. We want a robust and simple approach.
‘In essence, what we are doing now and for the future, is evaluating as if the machine was a stock picker and investing with the psychology and biases we encounter. It is stock picking but without the stockpicker.’