Singapore sovereign wealth fund GIC Pte has scaled back a core quantitative unit set up in 2016 under former Goldman Sachs Group Inc. banker Percy Wong, following a “tough” internal rethink of its investment teams and strategies.
The Systematic Investment Group, which had about 30 staff earlier this year, is being reorganized with some team members reassigned to different units while others are leaving to join external quant firms, according to people familiar with the matter.
Wong, who joined GIC in 2012, is also poised to leave, said the people, asking not to be identified discussing a private matter. Wong didn’t respond to requests seeking comment.
“The large majority of the existing team members will remain in GIC and continue to integrate quant skillsets into the business,” a GIC spokesperson said in a statement. “We expect fewer than 10 members to leave.”
The SIG had underperformed some of its peers within GIC, said the people, without elaborating. While some of the world’s best-known quant funds managed to deliver stellar performances during a challenging 2022 — raising the bar for similar strategies — the industry is having a more difficult 2023 even as global stocks rise.
GIC this week reported its worst annualized five-year returns since 2016, citing the slowing global economy following Russia’s invasion of Ukraine, and rising inflation.
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“Constantly evaluating each and every team is par for the course,” said Chief Executive Officer Lim Chow Kiat, in an interview this week. GIC has lots of partnerships with external managers because they are particularly good in some areas, he added. “If our expectation is that net of fees returns are going to be great then of course we have to do so rather than build our own team.”
Quant hedge funds use detailed research, statistical modeling and math to turn huge reams of data into investment ideas. Firms that run these strategies have raised hundreds of billions of dollars around the world despite some critics claiming the benefits are overstated.
Early Hires
The SIG was traditionally considered a core part of the fixed-income and multi-asset department led by Fixed Income and Multi Asset Chief Investment Officer Liew Tzu Mi.
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GIC’s efforts to use data to invest started with a bang, hiring former Point72 Asset Management chief data scientist Michael Recce in 2016. Fanesca Young - a quant expert from Los Angeles Capital Management - joined in 2017 and was head of global systematic equities.
But Recce left the firm within months to join Neuberger Berman Group in New York, while Young moved to Boston-based Acadian Asset Management this year, according to her LinkedIn profile.
Other efforts by GIC to drive cutting edge quant-related strategies and ideas included setting up a skunkworks called Kepler FI in 2017. The New York-based unit was wholly-owned but autonomous and supposed to create new investment methods.
Kepler eventually closed shop, with some executives leaving the firm while others were absorbed into teams including the SIG. By April this year, Kepler’s corporate vehicles in New York and Singapore were formally shuttered, according to regulatory documents from both jurisdictions seen by Bloomberg News.
“We did a very tough rethink of what are the areas that GIC — being the type of investor that we are and the scale and the network that we have — what are the things that really play to our advantages and what doesn’t play to our advantages,” Chief Investment Officer Jeffrey Jaensubhakij said, when asked about the SIG downsizing in the interview.
Quant Plans
To be sure, GIC is still maintaining other quant investing efforts. Sanjay Yadav — a former BlackRock Inc. executive who focused on macro strategies — remains at the firm. Aside from direct quant investing, the firm continues to invest in external hedge funds with quant strategies. In total, it has over 100 staff using the technologies and techniques to help analyze everything from securities trading to investment patterns of portfolio managers.
The firm is also hiring for its investment insights group, which among other things uses technology including quant techniques to come up with ideas. It’s also spearheading GIC’s efforts in using AI tools.
“Over the next two years or so we will be using it more and more to make our processes informed with more data, with more insights than maybe what the human eye and mind would normally come up with,” Jaensubhakij said.
