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Aaron Brown

Public Quant Funds Aren't Always What They Seem

There's a distinction between funds that select small-cap stocks and those that take size into account.
Heavy machinery.

Heavy machinery.

Photographer: Morris MacMatzen/Getty Images

Quantitative equity strategies  are a fast-growing retail product. There is more than $150 billion in quant equity public mutual funds, and such ETFs are on track to top $1 trillion this year.

Unfortunately, there’s little agreement on what these funds are. The two most common definitions are “uses numbers to select stocks” and “follows a systematic selection process.” Neither is useful because almost all professional investors use numbers and have a process.