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How Quant Funds Can Maximize Appeal to Investors While Minimizing Cyber and Regulatory Risk

In the hyper-connected trading and investment world of 2018, quant funds, which utilize highly sophisticated computer-based models to automatically carry out trades, are gaining increasing appeal. As the lure of these funds grows, however, it is critically important for investors to understand the differences between quant funds and seemingly similar vehicles; the various investment strategies that they offer; and the numerous risks that come with this type of trading. Managers must also recognize that running a quant fund raises unique operational and marketing challenges, not least because of the extremely high standard of due diligence that many institutional investors are likely to apply before making allocations. Quant funds also face unique external problems; for example, luring and retaining talent in a tech world dominated by Silicon Valley presents certain difficulties. To help readers understand these issues, Hedge Fund Law Report interviewed Ildiko Duckor, head of the emerging hedge fund manager program and co-head of the investment funds practice at Pillsbury in San Francisco. This article presents her insights. For more from Duckor, see “What Are Hybrid Gates, and Should You Consider Them When Launching Your Next Hedge Fund?” (Feb. 18, 2011). For commentary from another Pillsbury attorney, see “ALM General Counsel Summit Reveals How Hedge Fund Managers Can Prepare for SEC Examinations” (Nov. 19, 2015).

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