In an Alpha magazine article published today, Clifford Asness (founder of AQR Capital) and colleague Adam Berger launch a spirited defense of quant funds – saying they are not “black boxes” or reincarnations of the HAL 9000 from the movie 2001: A Space Odyssey.  The article is full of other colorful analogies that have become Asness’ trademark and it’s well worth the read (here – available without a login right now).

In “We’re Not Dead Yet” Asness writes:

“It’s not hard to see why people might think quant strategies are dead.  Recent performance, fears of overcrowding and the current market environment could easily lead one to question the viability of these strategies…we don’t think these concerns hold water.”

Asness and Berger base much of their argument on the belief that investors are irrational and that there are “fundamental, deep-seated, flaws in the way most investors make decisions.“  These result in trading opportunities (such as momentum and value a la Fama & French) which are likely to endure well into the future – regardless of the short term health of the hedge fund industry.

As the duo puts it:

More…