Robert Smith & team
J.P. Morgan
First-place appearances: 6

Total appearances: 11

Team debut: 2007

Robert Smith leads his eight-person J.P. Morgan squad to No. 2 for a second year running. These researchers are “creative at using J.P. Morgan’s vast resources to make measurable tools for dissecting the underlying drivers of performance and leveraging these tools to monitor material — but nonobvious — changes in the market,” one investor insists. For his part, Hong Kong–based Smith reports that the “active, multifactor quant models have been doing remarkably well in Asia in the last few years despite the markets’ favoring low-volatility strategies and shunning value stocks.” By balancing quant factors across value, momentum and quality styles, he adds, “typical blended, composite quant strategies have steadily added alpha” even during periods of market volatility caused by global market instability. The good news for the quant investor, he notes, is that “value investing has staged a recent comeback, and we have seen very strong returns to deep value, as judged by price-to-book, at the expense of the winners or momentum names.” Further, a continued pick-up of flows into emerging markets could fuel a solid value-driven recovery, he contends, “giving higher-beta names a welcome break.” Smith cautions, however, that the transition between investing styles will continue to hurt the momentum names. Over the past few years, pair-wise correlations between regional stocks have slipped to 25 percent from a peak of about 45 percent in 2009, a level they approached in 2010 and 2012, he observes, “suggesting a more favorable environment for stock-selection strategies and less investor concern about the macro mood. The focus has certainly shifted away from market timing and back to stock picking using fundamentals.” Overall, Smith concludes, “if the performance of value factors continues to improve and pair-wise correlations stay low, it should be a good year for quant investing using a composite blend of equity risk factors.”