Blending Fundamental and Quantitative Research

Author(s): Joseph C. Flaherty, Jr., and Laura Levesque
Published: January 31. 2013 10:32PM

Investors often seek to reduce risk and add value by diversifying managers. They may choose to hire both fundamental and quantitative managers with the belief that the combination of two differentiated investment approaches will result in a more efficient overall portfolio.

MFS believes that an investment process that dynamically integrates quantitative and fundamental research under a single manager can potentially produce a better outcome than simply allocating to independent quantitative and fundamental managers. The key advantage of this structure is the ability to place greater emphasis on the quantitative or fundamental input within the portfolio based on relative skill. Not all portfolio managers and analysts are equal when it comes to skills, experience, and knowledge. When we simply select two separate and independent strategies, we may not be able to take full advantage of strengths.

In this paper, we draw on academic and practitioner research to examine this investment thesis.

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