Northern Trust Asset Management on the Next Wave of Quant Innovation
What emerging techniques or tools are you offering that help quants generate alpha from alternative or unstructured data sources—such as text, ESG signals, or satellite imagery?
At Northern Trust Asset Management (NTAM) we for example deploy machine-learning (ML) based alpha signals by applying a clustering approach to value signals in growth sectors. To further unlock alpha from alternative or unstructured data sources, we actively leverage Natural Language Processing (NLP) technique to extract information from text-sources. These techniques allow us to efficiently summarize and contextualize vast amounts of structured data, and extract signals that traditional models may overlook. One example is our work on network momentum signals, which captures spillover effects among fundamentally related firms. We construct firm networks based on textual similarity derived from company filings using LLMs . This enables us to identify economically linked peers beyond standard industry classifications. Momentum is then measured across these peer networks. Our research shows that investors often underreact to information embedded in the price trends of interconnected firms, creating exploitable alpha opportunities. Overall, we have AI-enabled signals that straddle risk management, alpha generation and a link to sustainability.
How are you adapting your tools to support systematic strategies in fixed income — beyond the traditional equity quant space?
NTAM has a proud heritage of 30+ years of deploying systematic strategies in equities and a 10+ year track record of deploying systematic strategies in fixed income (corporate bonds). As part of our research agenda, we are exploring spillover signals across asset classes for potential enhancements across our quantitative equities and corporate bond strategy range. For example, we analyze how market sentiment or text-based networks in equities could spill over into credit markets i.e. by providing a timely signal for the movement of corporate bond spreads, but also vice versa.
Over the next 12–18 months, what new capabilities or product areas are you most excited about launching — and why do they matter to quants?
As an extension to our current strategy suite, we are planning to launch more active factor-based products, but also products that extract alpha more orthogonal to factors – from idiosyncratic alpha sources. These strategies allow investors to not only reap the benefits of traditional information sources, but also of more unstructured information sources, and offer clients clear diversification potential beyond their traditional return drivers.
Catch Guido Baltussen, Head of Quant at Northern Trust Asset Management live at Quant Strats (October 14-15) on our Data, AI, and Applied Innovation Stage.
