When the world began trading in stocks, exchanges were physical and floor-based. Dealers and specialists engaged to finally agree on terms of the security, price, size, and settled the trade on paper. A boisterous voice and persuasive way of talking were viewed as primary attributes for a successful broking career. A solid and dependable intuition was a close second.
As business sectors digitized, spread universally, and extended beyond geographical barriers, the trading floors were replaced by computer-equipped workstations. Associated and electronic capital markets offered many options to expand by unearthing in-depth information and multiple data points for analysis and exploration. Additionally, it allowed trade in different types of assets and securities. Information and data mining, investigation, and mechanized trading frameworks became the order of the day.
Hence, during the 1980s, mathematicians began investigating whether statistical ideas could be applied to stock investing. The study brought forth systematic trading, where investors applied numerical recipes to identify, project, and execute trades. Since quantitative models were used, these types of trades came to be known as quantitative – quant for short.
Mohit Mutreja and Parshant Mittal saw the development of quant investment dynamics in the U.S. from their early days as investment specialists.
AlphaGrep kicks off
Mohit, an Economics and Computer Engineering graduate from Wharton, University of Pennsylvania, had begun his career as a quantitative specialist and trader at Citadel Investment Group in Chicago. Here, he created, explored, researched, and traded quantitative/statistical strategies on US fixed-income securities. He then served as a portfolio manager at D.E. Shaw, another top-notch global investment management firm, where he managed a portfolio of Indian public equities and convertible bonds.
Elsewhere, at the same time, Parshant Mittal, with similar educational qualifications to Mohit, started working at Deutsche Bank's Credit and Rates trading desk. Thereon, he moved to AQR Capital where he was a portfolio manager and quantitative finance researcher. There, he oversaw different techniques that included determining stocks for emerging markets. Both Mohit and Parshant’s paths would often cross as they were operating in a common space.
Subsequently, when SEBI allowed algorithmic trading in 2008, Mohit and Parshant came to India and set shop as AlphaGrep Securities. Till 2020, they were proprietary investment managers purely managing internal capital. Over the last two-odd years, AlphaGrep has entered the external investment management space through numerous regulated investment vehicles in India and abroad. Today, AlphaGrep is one of India’s rare quant investment entities with customised investment offerings for resident high net-worth investors.
Quant Investing: A potential bull run
AlphaGrep is bullish about the potential for quant investment management in India. “Historically, direct stocks or mutual funds have seen a lower proportion of invested assets compared to real estate, gold, and fixed deposits. Having said that, the awareness and investment in capital markets by Indian investors have grown significantly over the past decade. Quant investing can offer superior investment products that are uncorrelated to other traditional investment options, besides removing emotions and human bias from the investment process”, explains Mohit.
Companies such as AlphaGrep devise proficient techniques basis quantitative models to execute trades with a measurable edge. More objective in nature, the mechanism does away with human bias that characterises traditional investment decisions. With computing power becoming increasingly affordable, quant investing promises to become a cost-savvy strategy for deploying financial resources into capital markets.
Quant investing can accelerate India’s investment management evolution. It can channelize India's private wealth and provide savvy investors with a data driven alternative to analysing financial securities and investing in them.
Future buoyant for quant investing
“The next decade would be a golden period for India’s investment management space and I am confident that quant investing will lead the way”, says Parshant, confidently anticipating quant investing’s increasing role in the country’s investment management landscape.
AlphaGrep is strategically placed to harness the power of systematic/quant investing in stocks and derivatives. It is presently active in over 25 exchanges across the world, including the U.S., Europe, and Asia. After its success in proprietary trading, it is aiming to apply the learnings of systematic trading to AIFs (alternative investment funds) and PMS (portfolio management services) products. Accordingly, it has now launched AlphaGrep Investment Management, a systematic investment management business, to manage external capital.
AlphaGrep is leading the movement to augment India’s wealth creating a culture of objective investing for more transparent and efficient financial markets.
Moneycontrol journalists were not involved in the creation of the article.
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