A surge in quantitative investing from the buy-side is driving an increase in technology spend for the sector and moving quant analysts’ roles into the front office.

Hedge funds and asset managers are increasingly turning to the quant approach in the face of unprecedented volatility in financial markets. This is fuelling appetite for new algorithms and the technology that can assist in the selection and creation of portfolios, according to a new report by consultancy Aite Group.

And this search for alpha is meaning the quant analysts, who would typically research theories and pass them on to portfolio managers and traders, are increasingly becoming a front office presence.

John Jay, an analyst at Aite Group, says: “Today’s quants are no longer development geek-types who remain hidden in the background. They are increasingly being pushed into the front office, taking the roles of traders and portfolio managers.”

And, as the quants’ roles evolve, a crop of technology vendors – such as 4th Story, ClariFI and QuantHouse - have sprung up to provide platforms for the buy-side.

Sang Lee, managing partner at Aite Group, tells us: “Still a lot of quants have developed their own platforms or applications, often on an ad hoc basis.” The new platforms are aimed at integrating these home-grown applications, he says.

Aite predicts that the market for these new alpha-generating platforms will reach $120m by 2010 – 10 times the amount spent on them in 2006.