Aaron Brown, Columnist

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.

September 5, 2017 at 12:00 PM UTC

Aaron Brown is a former head of financial market research at AQR Capital Management. He is also an active crypto investor, and has venture capital investments and advisory ties with crypto firms. He is the author of the soon-to-be-released "Wrong Number."

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Photographer: Morris MacMatzen/Getty Images

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Quantitative equity strategies1504288386375 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.