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Coke recently saw this news:
"According to Wind data statistics, as of August 18, the year-on-year return rate of the quantitative fund with the best performance this year has exceeded 20%. In addition, there are about 10 funds with a year-on-year return rate of over 10%. With the support of performance, various Investors have also increased their attention to quantitative funds. The overall scale of public quantitative funds has increased by more than 50 billion yuan this year. "
The market is so difficult this year. Not to mention ordinary investors, even professional fund managers are frowning. How come quantitative funds buck the trend?
Today Coke will talk to you about quantitative funds.
What are quantitative funds?
Quantitative funds are funds that use quantitative strategies to invest. "Quantification" can be simply understood as calculation. Quantitative strategy is to screen and summarize many "high probability" events that can obtain excess returns through the statistics and calculation of massive historical data. Modeling is based on this, and then through operation, verification, and debugging, the model is continuously improved, and finally this stock selection model is used for investment.
What is the difference between quantitative funds and active funds?
The biggest difference between the two is that quantification relies on models, while initiative relies on the fund manager himself.
The advantage of the model is that the data processing speed is very fast and it can detect market mispricing in time. At the same time, stock selection coverage is high, and positions can be very diversified;
The advantage of human beings lies in understanding and perception. Many times, data is just a representation, and different understanding and analysis methods will lead to different investment behaviors.
For example, if the performance shown in the financial report has increased significantly, does it necessarily mean that the stock has increased significantly? Many times it is not, and it may even plummet. For example, if the announced performance does not meet expectations, or the performance is not sustainable, etc., this may lead to this counter-logical phenomenon. These all require subjective judgment, and model analysis is difficult to reach people's hearts.
What kinds of quantitative funds are there?
Our domestic public quantitative funds are already 20 years old, and there are three main categories: active quantification, index enhancement, and market neutrality. Let’s talk about them one by one:
Active quantification relies on quantitative models to select stocks across the entire market. It is not constrained by a single index. It is very inclusive of industries and styles, and its volatility and cyclicality are relatively weak.
Index enhancement is to track an index and use a quantitative model to obtain returns that exceed the index. What you earn is the beta return of the index itself + the alpha return of stock selection by the quantitative model. Of course, if the index itself fluctuates greatly, the enhanced model can only stabilize it to a certain extent, and the trend will most likely rise and fall at the same time.
Market neutrality, also called hedging strategy, generally uses derivatives such as stock index futures, securities lending, ETFs or options to hedge market risks, thereby obtaining a relatively stable absolute return. There are currently not many such products, and the absolute value of the income is not high. We will not focus on it today.
Why is the quantitative performance better this year?
Because this year’s market environment is more consistent with quantitative strategies.
Based on historical data review, in a relatively weak falling market, quantitative performance will be better; in a comprehensive or structural bull market, active funds will perform better.
The following table is a statistical comparison of the annual returns of stock-biased active funds and quantitative funds in the past ten years:
From the second half of last year to the present, the excess return effect of quantitative funds has become more and more obvious. This is because during this period, the domestic economy is undergoing post-epidemic repair and recovery, market risk appetite has declined, market fluctuations have increased, the market has not seen a sustained upward trend, and sectors have rotated rapidly.
In such an environment, quantitative funds that can process data quickly and disperse their layout have a stronger profit-making effect than the in-depth research strategy of active funds.
Judging from the performance of public funds in the first half of this year, the average performance of quantitative funds significantly outperformed active funds. See the table below for details:
Moreover, most of the quantitative funds with better performance and faster growth this year are small-cap strategy products. There are two main reasons: first, the market style is gradually biased towards the small and medium-sized market capitalization style; second, the number of optional targets in the small and medium-sized market capitalization is more than that of the large market. There is more room for diversified strategies.
Can I still invest in quantitative funds now?
Can you consider it?
Judging from the recent market operation, it will take time to bottom out, and there will not be a significant change in style soon. Funds prefer small and medium-sized market capitalizations. may continue. Therefore, quantitative strategies will continue to be handy.
In addition to the usual base selection methods, such as historical performance, fund manager management capabilities, etc., there are two additional points to pay attention to:
1. Strategy capacity
That is, fund size. If the size of the fund is too large, the quantitative strategy will easily fail, and the ability to obtain excess returns will be significantly reduced, and it will even lag behind the performance benchmark.
So, a very simple way to judge whether the size of the quantitative fund is too large is to see if there are any purchase restrictions. Each product model is different, so the acceptable scale is also different. Many high-quality quantitative funds have the characteristics of "small but beautiful". After being discovered by everyone, they can easily be bought in large sizes.
For example, the famous "window fund" Jinyuan Shun'an Yuanqi has performed very well in the past two years. After experiencing 7 purchase restrictions, the single-day limit has increased from 100,000, 50,000, 10,000, 2,000, 100, 50, and now 10 yuan are basically not allowed to be bought. You can judge whether you should buy it based on the fund purchase limit, or find another way.
2. Benchmarking Benchmarks
This is mainly for index-enhanced products, as Coke also mentioned earlier. Index-enhanced quantitative funds target a single index, and the model only plays a role in smoothing fluctuations and enhancing returns. The overall trend of the product will still rise and fall with the index.
Therefore, it is particularly important to choose which index. You can combine the index’s stage rise and fall, index valuation, and market style. Consider other factors. For example, if you are optimistic about the growth of small and medium-sized stocks, you can consider quantitative funds with keywords such as CSI 500, CSI 1000, and growth.
Finally, Coke recommends several quantitative funds that have good historical performance and are not so crowded at the moment.
Nanhua Fenghui
Fund size: 105 million (as of 20230630)
Increase this year: 19.55% (as of 20230822)
This fund adopts The fundamental quantitative model mainly relies on the large-category asset allocation timing framework of "valuation-corporate profit expectations-risk preference" and the "dynamic EP-ROE" investment framework, focusing on micro-cap stock investment, and industry and individual stock positions are very dispersed. After the model was iterated at the end of last year, its effectiveness has improved significantly this year. In addition, the foundation slightly adjusted the portfolio positions based on the timing model, but the positions were basically around 80%.
Jinyuan Anshun High-Quality Selection
Fund size: 85 million (as of 20230630)
Increase this year: 18.63% (as of 20230822)
After the strategic iteration in the second half of last year, this fund is very similar to Jinyuan Anshun Yuanqi’s idea. It also focuses on micro-cap stocks, with more than a hundred stocks in its holdings, which is very dispersed. And now the scale is very small, so there is a lot of room for model strategies to be implemented.
China Zhisheng Value Growth
Fund size: 1.075 billion (as of 20230630)
Increase this year: 7.76% (as of 20230822)
The fund uses AI deep learning + multi-factor quantitative strategy to conduct market-wide stock selection, and the benchmark for performance comparison is the CSI 500. Compared with the CSI 500 Index Enhanced Index, the fund's investment scope is more flexible, its deviation flexibility is higher, and its ability to resist declines and fluctuations is at the forefront of similar funds.
There are also the National Finance Quantitative Multi-Factor and Investment Quantitative Selection, which are relatively popular this year. The current strategy applicability is also relatively high. However, due to the rapid growth in scale, the single-day purchase limit is now 10,000 to 20,000. Interested investors can also consider it, but pre-order quickly. It is estimated that if the scale increases, subscriptions will soon have to be suspended.
To summarize, this year's environment with large overall fluctuations, little synergy in the market, and a style that favors small and mid-cap stocks is indeed more suitable for quantitative strategies. In addition, quantitative strategies themselves have the characteristics of diversified positions and can also avoid the downside risk of a single industry to a certain extent. Ordinary investors can consider a certain proportion of allocation to serve as part of the bottom position fund in the fund portfolio.
Risk warning:
The opinions and analyzes cited in this article are analysis and judgments under current specific market conditions and based on certain assumptions. They do not mean that they are suitable for all future market conditions. They do not constitute investment advice to readers, nor do they constitute promotional materials, investment advice or guarantees for any business. They do not serve as any legal document. The market is risky and investments should be made with caution.
