Finding a balance between quants and fundamentals

Different research styles flourish in different market environments, says MFS portfolio manager Jeff McGrew.

According to the firm’s research, In periods of high market volatility a fundamental research process tends to outperform, because managers have the ability to change their mind, to react to new information about the changing macro environment.

In stable, trending market, quantitative processes come to the fore, McGrew says because they tend to take advantage of the factor persistencies that the model has picked up in its back tests over time. 

However, a combination of both creates something that behaves significantly differently and provides greater consistency of returns. 

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