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Firm
Profile
Jacobs Levy Equity Management, founded in 1986, is an independent, leading-edge quantitative equity manager focused exclusively on U.S. equity portfolios. Based in New Jersey, the firm manages assets for a prestigious global roster of corporate pension plans, public retirement systems, and endowments/foundations, including many of
Pensions & Investments' “Top 200 Pension Funds/Sponsors.” Clients are served by a staff of about 60, one-half of whom are professionals dedicated to research, quantitative systems, and implementation.
Commitment
to Innovative Equity Research
Prior to accepting assets in 1990, Bruce Jacobs and
Ken Levy devoted three years to researching market inefficiencies and analyzing
the complex economic and behavioral factors underlying security returns. As part
of this endeavor, they pioneered a proprietary process of “disentangling”
return-predictor relationships. Disentangling examines numerous inefficiencies
in a multifactor framework, providing “pure” returns that amplify predictive
power. The revolutionary findings resulting from this research led to the
development of a unique multidimensional, dynamic approach to investing. Based
on over 25 years of research and experience, this approach is designed to
achieve consistent outperformance through numerous small exposures to many
different market opportunities simultaneously.
The groundbreaking concepts that form the foundation for their investment
philosophy and approach are articulated in numerous articles written by Bruce and Ken, which have received awards from the Financial
Analysts Journal, Journal of Portfolio Management, and Journal of Investing. Many have become required reading for the CFA program
and MBA courses. Equity Management: Quantitative Analysis for Stock
Selection, published by McGraw-Hill and later translated into Chinese, collects 15 of Bruce and Ken's
articles, including those on engineering portfolios, long-short investing,
and what Nobel laureate Harry Markowitz has called their seminal work on
disentangling and integrated portfolios. Beginning in the late 1990s, the Financial Analysts Journal and
Journal of Portfolio Management published a number of articles in which Bruce and Ken derived precise formulas for optimally equitizing an active long-short portfolio with benchmark exposure. These articles laid the foundation for 130-30 long-short strategies. Bruce and Ken have also coauthored with Harry Markowitz several articles on portfolio optimization with short sales and, most recently, financial market simulation.
Bruce and Ken are the editors of Market Neutral Strategies, published by
Wiley. This book provides readers with insiders' views of the
implementation, the risks, and the benefits of long-short equity investing and
other strategies. It also covers tax and ERISA concerns for tax-exempt
investors, the “transportation” of alpha from a particular market neutral
strategy to other asset classes, and the failure of two notorious “market
neutral” hedge funds.
How I Became a Quant: Insights from 25 of Wall Street’s Elite, also published by Wiley, profiles investment professionals at the forefront of the “quant revolution.” Bruce and Ken contributed a chapter detailing the development of the firm and the Jacobs Levy investment philosophy.
The care taken in the Jacobs Levy investment process is well represented by
Bruce's incisive analysis of modern capital ideas in his critically acclaimed
book, Capital Ideas and Market Realities, published by Blackwell.
This work discusses the pitfalls in translating financial ideas into practice.
Jacobs Levy Equity Management was a founding sponsor of the Research Foundation of the CFA Institute and of the Fischer Black Memorial Foundation, and the firm contributes to the New York University Salomon Center. The firm also founded the Bernstein Fabozzi/Jacobs Levy Awards in 1998, which annually honor the best papers to appear in the
Journal of Portfolio Management.
In 2011, in honor of the firm’s 25th anniversary, Bruce Jacobs and Ken Levy founded the Jacobs Levy Equity Management Center for Quantitative Financial Research at The Wharton School and the Wharton-Jacobs Levy Prize for Quantitative Financial Innovation. The Jacobs Levy Equity Management Center for Quantitative Financial Research is dedicated to the advancement of quantitative finance through the creation and dissemination of innovative knowledge. The Center also grants the biennial Wharton-Jacobs Levy Prize for Quantitative Financial Innovation to recognize those who have published articles that demonstrate outstanding quantitative research that has contributed to an innovation in the practice of finance.
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