Financial markets across equities, fixed income, currencies and commodities exhibit persistent inefficiencies that take the form of risk premia, trends, mean reverting behavior or other statistical biases. Systematic strategies are liquid and transparent investments that use a prescribed algorithm designed to capture and benefit from these inefficiencies.
Sytematic strategies share the following common features:
- a) their prices are calculated on a daily basis,
- b) they are investable with daily liquidity,
- c) they offer exposure to liquid financial instruments only,
- d) they are calculated according to a fixed, formulaic methodology, and
- e) they aim to exhibit de-correlation or outperformance compared to traditional asset benchmarks.
Systematic strategies may have exposures to a range of asset classes, regions and investment philosophies, which may be focused or diversified.
Over the past ten years the growth of systematic investing has accelerated both in numbers and in assets.
What are systematic strategies?
By nature, systematic stratgeies operate across all asset classes but they do not invest in illiquid sectors. They do not involve discretion; instead, they exploit statistical biases in a systematic way. They offer investors much better visibility and control of the risks involved, in addition to daily liquidity, no lock-up and no gate. They also bear lower costs.