AlphaGrep is Bringing Attention to Quant Trading in India
3 min read 05 Jun 2023, 06:24 PM ISTAlphaGrep is bullish about the potential for quant investment management in India
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When the world started trading in stocks, the exchanges were physical and floor-based. Traders and brokers interacted and agreed on a security, price, and quantity, and settled the trade on paper. A loud voice and convincing rhetoric were considered the primary attributes to become a successful trader. A strong and reliable gut instinct was the next most important quality.
As markets digitized, spread globally, and expanded, the floors were replaced by computer terminals. Connected and electronic markets offered ample opportunities to expand by throwing up immense data points, and new and rich data sources for analysis. Also, it facilitated trade in new types of assets and securities. Data mining, research, analysis, and automated trading systems became a distinct possibility.
Subsequently, in the 1980s, mathematicians started exploring whether statistical concepts could be applied to stock trading. This gave birth to systematic trading, where investors apply mathematical formulas to decide the trade of financial securities. Since the trades are mostly decided by a quantitative model, it is also called quantitative trading – quant for short.
Mohit Mutreja and Parshant Mittal saw the evolution of quant trading in the U.S. from close quarters.
The AlphaGrep beginnings
Mohit, an Economics and Computer Engineering graduate from Wharton, University of Pennsylvania, had started his career as a quantitative researcher and trader at Citadel Investment Group in Chicago, where he built, researched, and traded quantitative/statistical strategies on US fixed income securities. He then worked as a trader at D.E. Shaw, another premier global investment management firm, managing a portfolio of Indian public equities and convertible bonds.
Around the same time Parshant Mittal, who has similar educational qualifications to Mohit, started his career on Deutsche Bank’s Credit and Rates trading desk before moving to AQR Capital where he was a portfolio manager and quantitative finance researcher. He managed various investment strategies that included selections of stocks for emerging markets during his tenure with AQR.
So, when SEBI permitted algorithmic trading in 2008, Mohit and Parshant came to India and set shop in the form of AlphaGrep Securities. Till 2020, they were proprietary investment managers managing internal capital only. Over the last two-odd years, AlphaGrep has ventured into the external investment management space through multiple investment vehicles in India and abroad. Today, AlphaGrep is one of India’s very few quant trading firms that have specific investment offerings for resident high net-worth investors.
Quant Investing’s potential bull run
AlphaGrep is bullish about the potential for quant investment management in India. “Historically, direct stocks or mutual funds have seen a lower proportion of invested assets compared to real estate, gold, and fixed deposits. Having said that, the awareness and investment in capital markets by Indian investors have grown significantly over the past decade. Quant investing can offer superior investment products that are uncorrelated to other traditional investment options, besides removing emotions and human bias from the investment process", explains Mohit.
Entities such as AlphaGrep devise efficient strategies based on systematic algorithms to affect trades with a statistical edge. It brings a lot of objectivity into the exercise and replaces the human bias that may creep into traditional forms of investment decisions. With the cost of computing power gradually reducing, quant trading can become a cost-effective method of investing in capital markets.
Quant trading can continue the evolution of India’s investment management scenario. It can harness India’s private wealth and provide sophisticated investors with an alternative to traditional methods of analyzing financial securities and investing in them.
Quant trading’s future outlook
“The next decade would be a golden period for India’s investment management space and I am confident that quant investing will lead the way", says Parshant, expressing anticipation about quant trading’s role in the country’s investment management space.
AlphaGrep is suitably positioned to leverage the power of systematic/quant investing in stocks and derivatives. It is now trading in over 25 exchanges globally across US, Europe, and Asia. After its success in proprietary trading, it wants to apply the learnings of systematic trading to AIFs (alternative investment funds) and PMS (portfolio management services) products. It has now launched AlphaGrep Investment Management, a systematic investment management business to manage external capital.
AlphaGrep is at the forefront of the movement to enhance India’s wealth by making the investment process more objective and the financial markets more transparent and efficient.
Disclaimer: This article is a paid publication and does not have journalistic/editorial involvement of Hindustan Times.
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