The main differentiating factor of any quantitative and rules-based investment selection process is its objectivity. It’s good for the investor because objectivity implies discipline, and therefore there is a chance that good performance can be repeated.
QAS’ quantitative algorithm selected among others the Market Vector Gaming ETF (BJK) as one of the most attractive investment opportunities (“New & Timely” search option) as of February 17, 2016. This relatively small ETF ($18Mln AUM) consists of 43 holdings – major international Casino/Gaming companies.
The fact is that there is no consistent media coverage on many smaller niche markets, and therefore investors don’t pay a lot of attention to them. However, periodically – these markets quietly emerge as leaders. That’s when everybody starts paying attention.
If you check the performance of BJK you may wonder why anyone would buy a fund that has dropped 50% in value since March 2014, but according to QAS quant work this ETF is currently a “low risk – high reward” investment opportunity. It is interesting that this ETF actually gained +50% before, from 2012 to 2014. One thing we all know for sure – it’s better to be in it early than late.
Good institutional grade quant tools allow portfolio managers to capture these markets early, and therefore increase their chances to repeat good performance over and over again.