Quant or trad: How fundamentals can drive both

Many investors still see traditional fundamental investing and quantitative strategies as polar opposites. The former is often viewed as a patient, bottom-up craft, while the latter is sometimes dismissed as opaque or overly reliant on algorithms. But this binary thinking misses the reality: today’s quant approaches – especially those like MDT’s – are increasingly grounded in the same company fundamentals that underpin traditional strategies.

Take MDT’s quant strategy. At its core, the focus is on company data it believes will move stock prices – valuation, cash flows, debt coverage, management efficiency – in a way that a skilled bottom-up manager might also approach it. The main difference is that the team expresses these insights mathematically, not as a replacement for judgment, but as a systematic extension of it. So, rather than drawing a line between ‘fundamental’ and ‘quantitative,’ we believe it makes more sense to distinguish between ‘traditional’ and ‘quantitative’ approaches to fundamental investing.

Breadth, depth, and skill: Who brings what?

This distinction matters because each approach brings different strengths. Traditional bottom-up managers tend to excel at deep, subjective analysis – site visits, management interviews, vendor calls – within a focused universe of stocks. Their expertise may be undeniable, but their reach is naturally limited. As the coverage universe expands, the depth of insight can diminish, and resources get stretched. 

Quantitative managers, by contrast, leverage systematic processes to cover thousands of stocks. This breadth allows for broader diversification and potentially lower volatility, without sacrificing the focus on company quality. Both approaches, at their best, are fundamentally interested in identifying strong businesses. The difference is scale: quants apply their lens across the market, while traditional managers go deep within a narrower field.

It’s worth noting that not all quant strategies will share this focus. Many non-fundamental quants are indifferent to company quality, instead seeking to exploit market inefficiencies. We believe MDT’s approach stands apart by keeping fundamentals front and center, while reducing the risk of bias through systematic application.

A glass box, not a black box

One common critique of quant investing is the ‘black box’ label. Here, the concern is with processes that are mysterious and hard to understand. We believe MDT’s fundamental quant approach is the opposite. Our goal is to provide a ‘glass box' transparent process, being able to show clearly what goes in and what comes out to help investors understand which factors drive results, and why.

Of course, not all quant strategies are this open. Statistical arbitrage and high-frequency trading often rely on proprietary algorithms and automation, with little transparency. In our view, it’s important not to conflate these with fundamental quant. MDT’s process is driven by many of the same factors and intuitive understanding of markets as traditional bottom-up investing. Where we see a difference is in the systematic execution of the approach.

Where fundamental quant fits in a portfolio

Ultimately, both traditional and quant approaches to fundamental investing have their place. Traditional managers can offer depth and tactical insight; fundamental quants can bring breadth, discipline and diversification. For investors comfortable with bottom-up strategies, a fundamentally driven quant approach should feel familiar – just delivered at scale, with added rigor.

Fundamental quant isn’t an alternative to traditional investing; it’s a complementary evolution. Perhaps, then, by combining the best of both worlds, investors can access a broader opportunity set without being subject to the perceived limitations of either.

To read more on this topic, please download the full paper .