After more than two decades immersed in the world of quantitative hedge funds and managed futures, Michael Harris has emerged from retirement to join Quest Partners, a quantitative firm led by Nigol Koulajian. Harris, formerly of Campbell & Co., brings a wealth of experience and a renewed sense of purpose to his new role as president. His decision to return to the hedge fund arena underscores a significant shift in investor sentiment and the growing relevance of firms like Quest Partners in today’s complex economic landscape.
Harris’s departure from Campbell & Co. in late 2019 was driven by a growing frustration: investors seemed to disregard the critical need for hedging strategies. He observed a prolonged period of market optimism where diversification and risk mitigation took a backseat. “Investors kept saying, ‘I’ll get to that down the road when I need it,’ but we kept going year after year where they just didn’t need it,” Harris explained. This sentiment shifted dramatically with the onset of the pandemic, yet even the market turmoil of early 2020 did not solidify the case for hedging, thanks to swift intervention by the Federal Reserve.
However, the market dynamics of the past six months have presented a compelling turning point. The confluence of persistent inflation, the ongoing pandemic, and geopolitical instability stemming from the war in Ukraine has created an environment where the expertise of Quest Partners and the strategic thinking of leaders like Harris are more critical than ever.
In his first interview since joining Quest Partners, Harris articulated his mandate for the $2.5 billion firm. While refraining from commenting on specific performance figures, reports indicate the firm’s flagship strategy has delivered impressive returns, reportedly 23.6 percent year-to-date through May, starkly contrasting with the significant downturn experienced by the S&P 500 and Nasdaq during the same period. This performance highlights the potential of Quest Partners‘ approach in navigating volatile markets.
Beyond overseeing day-to-day operations and allowing Koulajian to focus on broader strategic direction, Harris is tasked with strategically expanding Quest Partners‘ capacity. “Our asset level has been rising and we’re getting close to capacity in our main strategy,” Harris noted. A key aspect of his role is to identify and implement strategies for sustainable growth, ensuring Quest Partners can continue to deliver value as assets under management increase. This includes exploring new avenues to expand existing strategies beyond current capacity projections. While acknowledging the firm’s communicated potential pause on new investments at $3 billion, Harris emphasizes the inherent uncertainty in forecasting maximum capacity, a common challenge across the asset management industry.
Controlling trading costs is paramount for Quest Partners, particularly as a short-term manager. Harris emphasizes that meticulous management of these costs is crucial for preserving alpha generation. The firm is actively engaged in research to identify and implement innovative methods to minimize trading expenses, ensuring optimal returns for their quest partners – their investors.
Looking ahead, Quest Partners is proactively exploring diversification through both market expansion and strategy innovation. This includes researching new markets to incorporate into their strategies and developing new alpha sources, potentially with different time horizons. Harris also points to longer-term initiatives focused on product development, suggesting a potential evolution beyond their current flagship strategy. “We don’t have to be a single-strategy shop. We’ve made a name for ourselves in this short-term space, but there can be others,” he stated.
A recurring question Harris encounters from prospective investors and clients revolves around timing: Is it too late to invest? His resounding answer is no. This conviction was a significant factor in his decision to join Quest Partners. Harris believes the current macroeconomic climate, characterized by persistent inflation and global uncertainties, signifies a regime shift rather than transient issues. He posits that this environment is particularly conducive to the strategies employed by Quest Partners, suggesting that the firm is well-positioned to capitalize on ongoing market dynamics and deliver value to its investors. The expertise and forward-thinking approach championed by Harris at Quest Partners offer a compelling perspective for investors seeking strategic partnerships in navigating today’s complex financial landscape.
