Beyond the numbers: Combining data science and human insight

After beating more than 90% of peers last year, Arup Datta and the Mackenzie Global Quantitative Equity Team aren’t resting on their laurels. With 2023 calendar year returns of 22.8% and 16.4% for their global and emerging markets equity funds, respectively,¹ Datta takes pride in the Mackenzie Global Quantitative Equity Team’s achievements but is never complacent.

“We are coming off a very strong 2023,” says Datta. “But what really drives my team is figuring out what we can do to successfully navigate 2024 as well.”

Datta is a 30-year veteran of quantitative investing and leads the 10-member team, which is responsible for managing $10 billion (CAD) in retail and institutional assets. The team is based in Boston, the hub for quant investing in North America, with access to a high-quality pool of talent from Ivy League institutions like MIT and Harvard.

Forward-thinking and always learning, Datta and his team have forged what they believe to be a unique brand of quant investing, which has been paying off with remarkable consistency, since taking over the strategies.

Consistently strong performance — % of peers beaten (CAD, as of September 30, 2024)

Based on Morningstar Global Equity and Emerging Markets Equity categories.

*Arup Datta took over as Lead PM for the Mackenzie Emerging Markets Fund on June 30, 2018 and for the Mackenzie Global Equity Fund on November 16, 2020.

In addition to all the rigour you would expect in a quant model, the team considers itself to be:

• Flexible with the use of new tools such as natural language processing and machine learning.
• Responsive by tweaking the model to adapt to macro events and market dislocations.
• Core-focused, with access to value, growth and quality opportunities.
• Open, not siloed, to share ideas across multiple disciplines.

Analyzing more than numbers

“What’s exciting is this blend of old and new,” says Datta. In the seven years since he joined Mackenzie, the team has introduced more cutting edge technologies — machine learning and natural language processing (NLP) — within their stock-picking process and anticipates that this integration will increase in the future.

Historically, non-numerical information was purely the domain of fundamental managers and off limits for quants. Machine learning is changing that. Today, Datta’s team uses NLP codes that can sift through any text and pick up inferences. In fact, NLP is currently part of their live process, contributing some of the ideas they use to pick and evaluate stocks.

A core approach for smoother alpha delivery

Datta believes that being core-focused — with exposure to value, growth and quality at the same time — allows the team to deliver excess alpha in a more consistent manner.

“Over time, you will have value, growth and quality periods in the market, and in the long term, we expect to come out ahead, with more consistent returns,” he says.

Investors benefit from an approach that can navigate different environments and market cycles. For example, while value managers had a huge year in 2022, Datta makes the point that these same managers may have struggled significantly in 2019 and 2020. In contrast, his team delivered impressive returns when value stocks in emerging markets were at their worst point in the past 20 years.²

Responsive to macro events

Datta is quick to clarify that they are very disciplined pure quantitative investors, but not “black box quants” — those who rely fully on the “machine” and won’t change anything.

“We believe you’re leaving money on the table if you're not seeing what's happening in the market,” he says.

In most environments, Datta and his team follow the model they built, which ranks 10,000 stocks in emerging markets and 8,000 in developed markets on more than 20 different factors. Much of it mimics what a fundamental manager looks at, but since they leverage computing power, they can rank and re-rank this vast universe of stocks as and when they want — usually once a day — and trade based on that ranking.

“But with all of the macro events in the past five years, even a strong quant team like ours needs to consider the environment,” says Datta. “Are we really well positioned? Are there opportunities we can take advantage of?”

Macro insights plus timely access to new research and data is a powerful combination, especially when you are the one who has built the machine, Datta says: “You know exactly how to make it better-equipped to deal with the current situation.”

*Arup Datta took over as Lead PM for the Emerging Markets strategy on June 30, 2018 and for the Global Equity strategy on November 16, 2020.

Source: Morningstar Direct, returns over 1 year are annualized as of September 30, 2024.

The Mackenzie Global Quantitative Equity Team goes beyond the stereotypes of traditional quant investing. While grounded in a strong foundation of investment discipline and philosophy, their approach is far from a “set-and-forget” black box. The model allows for flexibility, responsiveness and human discretion to supplement the rigour of the process. It’s a team that is always pushing to navigate smarter and better through the latest tech advancements and the synergy between technology and people.

“I like numbers,” says Datta. “I need that safety to fall back on. I want my decisions to be based on sound facts, and as close to the numbers as possible. That's why I'm a quant.”

¹ Percentile rankings are from Morningstar Research Inc., an independent research firm, based on 2023 calendar year performance of 22.8% and 16.4% for Series F of Mackenzie Global Equity Fund and Mackenzie Emerging Markets Fund, respectively. For Morningstar Global Equity category: the number of funds in the category is 1,693, 1,402, 1265 and 1,397 for 1yr, 3yr, 5yr, and 10yr respectively. For Morningstar Emerging Markets category: the number of funds in Emerging Markets Equity category is 268, 225, 207, and 109 for 1yr, 3yr,5yr, and 10yr respectively. The percentile rankings compare how a fund has performed relative to other funds in a particular category and are subject to change monthly. ©2024 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

² Mackenzie Emerging Markets Fund returned 11.6% in 2019 versus benchmark 11.7% and returned 18.9% in 2020 versus benchmark return of 16.3%. Benchmark: MSCI Emerging Markets Investable Market Index.

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