Glossary
Quant investing glossary
Short, factual definitions of the terms used in systematic and quantitative investing.
- Systematic investing
- An approach to portfolio management that uses a defined, rules-based process, rather than individual discretion, to decide what to buy, sell and hold.
- Momentum (factor)
- The tendency for securities that have performed well over the recent past (typically six to twelve months) to continue performing well in the near term.
- Factor investing
- An investment approach that targets specific, measurable characteristics of securities, such as momentum, value or quality, that have historically been associated with excess returns.
- Alpha
- The portion of a strategy's return that cannot be explained by its exposure to the broader market. In effect, it represents the value added by the investment process itself.
- Benchmark
- A reference index against which a fund's performance is measured.
- Correlation
- A statistical measure, from -1 to +1, of how closely two investments move together over time. A lower correlation between a fund and the broader market suggests its returns are driven by different factors, which may support diversification when combined with other holdings in a portfolio.
- NAV (Net Asset Value)
- The value of a fund's assets minus its liabilities, usually expressed per unit, used to price applications and redemptions.
- Long-only
- A strategy that only takes long (buy) positions, profiting when the value of those holdings rises.
- Long/short
- A strategy that takes both long positions (expecting a rise) and short positions (expecting a fall), aiming to profit from relative performance rather than the market's overall direction.
- Defensive positioning
- Adjusting a portfolio's composition, for example holding more cash or fewer economically sensitive stocks, in response to changing market conditions, as part of a fund's risk management framework. This is a form of managed risk, not a guarantee against loss.
- Wholesale client
- An investor category defined under section 761G of the Corporations Act 2001 (Cth), broadly covering investors who meet certain asset or income thresholds, or invest above a minimum amount. This is distinct from retail clients, who receive additional regulatory protections.
- Drawdown
- The decline in a fund's value from a previous peak, typically expressed as a percentage. A common measure of downside risk.
- Machine learning (in investing)
- A set of statistical techniques that allow a system to identify patterns in data and improve its predictions over time, used in systematic investing to help identify and weight signals.
- Information Memorandum (IM)
- The disclosure document for a wholesale fund, setting out the strategy, risks, fees and terms. It is the wholesale equivalent of a retail Product Disclosure Statement.