PERHAPS the only local fund that has incorporated quant methods would be BIMB Investment Management Bhd, via its tie-up with strategic partner UK-based Arabesque Asset Management Ltd.
In an interview with StarBizWeek back in April, BIMB Investment CEO Najmuddin Mohd Lufti said that quantitative investment strategy is going to change the fund management landscape.
Under the partnership with Arabesque, BIMB Investment will be using Arabesque’s quantitative method system to help with the stock selection process.
The quantitative model is created by the firm to identify value stocks through data analysis that also takes into account the environmental, social and governance (ESG) factors.
Arabesque’s quantitative system will screen through stocks across the globe. Only those which qualify based on earnings, accounting methods and ESG factors, among others, will be the chosen invested stocks.
The fund leverages on a quant system, meaning that it uses a systematic, disciplined and rules-based investment process of stock selection driven by artificial intelligence (AI) technology.
The fund is rebalanced on a monthly basis while the factors used to derive the portfolio will be determined on a yearly basis.
The ESG data provide forward-looking information and insights on how a company is managed and the quality of the strategic decision it takes to position the firm for long-term financial success.
In a nutshell, the BIMB-Arabesque i Global Dividend Fund 1 screens through some 77,000 stocks and via its filtering process chooses some 100 of the best stocks that fulfils all of its criterias.
By computing ESG factors, Arabesque is removing uncertainties and better manages investment risks.
The quant model also looks at non-financial data such as labour issues and carbon emissions, to give a better understanding of the company’s long-term performance compared to just focusing on historical financial performance.
In embracing quants, BIMB Investment is reviving the firm capabilities through both machine and human to consistently deliver investment performance.
For now, BIMB manages two funds with Arabesque, both of which are applying the quantitative method – the BIMB-Arabesque i Global Dividend Fund 1 and the newly-launched Arabesque Malaysia Shariah-ESG Equity Fund.
The Arabesque quant method was developed in 2011 by Barclays Bank Plc.
In 2013, its senior management bought out all rights and intellectual property and established Arabesque as an independent firm.
To make the ESG data work, BIMB admits that quality of data is crucial and that the firm constantly needs to update it over time.