Just what is it that quant managers do? We asked Dan Mahr, Head of Federated Hermes’ MDT Advisers, exactly that question and his response was enlightening. One thing we learned: it’s not all algorithms and machine learning – the human interface is important too.
At MDT Advisers, portfolio construction is a daily, data-driven process powered by proprietary machine learning tools.
Each night, the team downloads data from vendors, recalculates company characteristics, and runs every stock in the domestic equity universe through our ‘decision tree’2 model to generate fresh forecasts. These forecasts feed into our proprietary portfolio optimiser, which rebalances each strategy and produces a trade list for review.
The day begins with the trade review process, where human oversight plays a critical role. While MDT’s models operate mechanically, the team ensures that the data is accurate and that no material news has emerged that the model may not yet reflect. This step is not about subjective overrides, but about validating inputs and understanding the model’s behaviour.
Beyond daily operations, most of our time is spent on research and model enhancement. Idea generation is central to MDT’s process, and the firm’s commitment to building tools in-house – from back-testing engines to risk models – gives us exceptional flexibility and control.
