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Asiahedge 07-2007 (extract)

Also pursuing a quant strategy from Singapore is Quant Asset Management, which has $139 million in AUM at the end of June 07, comprising $88 million in the QAM Global Equities Fund and $51 million in the QAM Asian Equities Fund.

"The unique feature of our funds is that we leave everything to the model. The QAM quant model has its own artificial intelligence; it detects movements in an enormous amount of data from 52 countries worldwide very fast and converts that into investment decisions that result into a portfolio of around 120 stocks.

Our investors need to know that we are entirely consistent. If there's a human overlay your consistency is out of the door and on top of that you have no option of back-testing," says QAM's co-founder Frank Holle, who set up QAM with Chatchai Ngampakdeepanich in 2004. The years of back testing that the model enabled them to do mean that they have a very clear idea of the kind of returns and volatility they can expect.

The model is based on a dynamic blend of 20 to 30 factors according to several underlying convictions- that share prices are driven by earnings expectations and relative valuations, and that markets are at best semi-efficient. The balance between longs and shorts is also model-driven and the factors are rebalanced by the model on a monthly basis. "Because we rebalance only once a month, if something happens within that month we don't react, we wait, and over the long term we are always exposed to market in order to fully milk the track we're on," says Holle.

Since launch, both funds have performed according to expectations- as of the end of June the global fund was up 30% year-to-date and had an annualised compound return of 30.5% while the Asia fund was up 40% year-to-date and had an annualized compound return of 29.8%; volatility for the two funds has so far ranged between 16% and 19%. With such target returns and volatility neither fund could be considered conservative. "That's deliberate," says Holle. "But with these kinds of returns and the consistency in our approach investors will be very happy to leave the management of their fund to a computer."

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