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Peter Went on Managing the Risks in Quantamental Strategies

The quantamental approach to portfolio management can generate unique strategies for maximizing investment returns. According to Peter Went, a Lecturer in the master's program in Applied Analytics at Columbia's School of Professional Studies, the approach also presents unique risk challenges.

In a recent article published by the Global Association of Risk Professionals (GARP), Went delves into the complexities of combining fundamental and quantitative approaches to portfolio management, beginning with the fact that the portfolio return is “determined by algorithmically-weighted exposures to two different types of factors.” This “dual-factor vector problem,” he says, complicates hedging, modeling and other approaches to assessing and managing risk.

As a result, a new paradigm is needed, Went suggests, concluding that “the risk management aspects of the quantamental approach need to be properly understood and integrated better before portfolio managers can rightly herald their quantamental skills.”

Read the full article and learn more about the M.S. in Applied Analytics program.