Quantsmile Quantitative Portfolio Management - TG Securities Limited

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Nov 18, 2013 (3 years and 11 months ago)

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Quantsmile: Quantitative Portfolio
Management






Index


Company Introduction



Why Quantsmile



Quantitative Investment Process



Portfolio Construction



Portfolio Optimization



Execution Management



Risk Management



Rebalancing



Asset Management Services Offered by Quantsmile


Company Introduction


Quantsmile is one of the top leading technology driven
portfolio management companies based in Hong Kong



Quantsmile is using quantitative approach in asset portfolio
management


Why Quantsmile (1)

1. Good Reputation


Being a regulated entity, it has built up its reputation in using
advanced quantitative technology to earn alpha in portfolio
management


It is licensed by Hong Kong Securities and Futures Commission to
conduct asset management business

2.
Competitive Advantage


It combines the pro of value investing process of the traditional fund
and risk management solution of the hedge fund, to develop its own
quantitative investment model


With the use of systematic and quantitative “Value Investing”
solution, Quantsmile searches for under
-
valued companies. Their
share prices would benefit from up
-
side adjustment of the non
-
efficient market in short term to the efficient market in long term

Why Quantsmile (2)

3. Investment Team


Quantsmile has experienced portfolio managers and strong
quantitative research team


It has a stable management team, and most of its portfolio managers
have been working together for ten years at Quantsmile

4. Strive for Better Return


Since management team allows research and investment process be
implemented at the unit level, and the responsible portfolio manager
having a degree of autonomy, these enable the portfolio be flexibly
managed for better return

5.
Prudent Approach


We aim to minimize investment risk and preserve capital. We build a
diversified portfolio with high quality and undervalued stocks, pre
-
determined constraints set in the model, and the use of derivatives
products to hedge market risk

Quantitative Investment Process
Involves:


Portfolio Construction



Portfolio Optimization



Execution Management



Risk Management



Rebalancing




Portfolio Construction (1)


Top
-
down investing approach



Over
-
weight sectors which have outperforming potential



Earn alpha through careful over
-

and under
-
weight different
sectors against benchmark


Portfolio Construction (2)


Select stocks within each sector in a value
-
investing
framework



Quantitative fundamentals (PE, PB, DCF valuation) are
applied in the stock screening process



One year target price will then be calculated based on the
above assessment


Portfolio Construction (3)


Research team provides fundamental studies on each sector
and stocks for inclusion


Investment management committee regularly reviews macro
economic environment variables


Review results will then be incorporated back to the stock
selection process for portfolio adjustment


Portfolio Construction (4)

Input one year of target price and stock volatility

Portfolio Construction (5)


Industry Sector

Portfolio Construction (6)


Over/Under
-
weighted Sectors

Portfolio Optimization (1)


Selected stocks shall then undergo a series of fine
-
tuning



Clients’ risk tolerance and return target are part of the
optimization consideration


Portfolio Optimization (2)


Efficient frontier derived from the CAPM model, combined
with optimization parameters, will then generate an
optimized portfolio set for implementation



Constraints with minimum and maximum allowable
portfolio weightings could be imposed


Portfolio Optimization (3)

Constraints with Minimum & Maximum Weighting Conditions

Portfolio Optimization (4)


Portfolio After Optimization and the Efficient Frontier

Execution Management


If market
-
neutral strategy is selected, delta hedging is
applied to the equities portfolio



By eliminating the market exposure (beta), market out
-
performance becomes the alpha earned for the portfolio



In executing equities buy and sell orders, quantitative and
adaptative execution algorithm is employed to maximize
VWAP


Risk Management


Quantitative risk control measures such as Value
-
at
-
risk
(VaR) are real
-
time monitored



Portfolio with risk exceeding acceptable level will be
scrutinized and appropriate action will be taken to bring risk
exposure back to accepted level



Up
-
to
-
date risk reports are always online and available to
management team for review and actions, as needed


Rebalancing


Market exposure is constantly reviewed and monitored
using advanced reporting tools



When certain exposure parameters have essentially shifted,
dynamic rebalancing techniques will be put into action



To lock in alpha, dynamic rebalancing will strive to adjust
hedging proportion and execute equities buy (at low) and
sell (at high) transactions


Investment Performance Record for
Discretionary Account

Date
10/2006
11/2006
12/2006
Discretionay Account
0.08%
5.38%
9.06%
Heng Seng Index
4.45%
3.47%
5.30%
Date
1/2007
2/2007
3/2007
4/2007
5/2007
6/2007
7/2007
8/2007
9/2007
10/2007
11/2007
12/2007
Discretionay Account
6.90%
-0.28%
2.68%
6.71%
8.43%
2.81%
4.94%
1.12%
15.89%
10.28%
-6.15%
-2.83%
Heng Seng Index
0.71%
-2.26%
0.76%
2.62%
1.55%
5.52%
6.49%
3.45%
13.17%
15.51%
-8.64%
-2.90%
Date
1/2008
2/2008
3/2008
4/2008
5/2008
6/2008
7/2008
8/2008
9/2008
10/2008
11/2008
12/2008
Discretionay Account
-13.56%
5.85%
-9.36%
13.78%
-3.85%
-9.60%
3.43%
-7.87%
-20.45%
-24.47%
3.46%
10.10%
Heng Seng Index
-15.67%
3.73%
-6.09%
12.72%
-4.75%
-9.91%
2.85%
-6.46%
-15.27%
-22.47%
-0.58%
3.59%
Date
1/2009
2/2009
3/2009
4/2009
5/2009
6/2009
7/2009
8/2009
9/2009
10/2009
11/2009
12/2009
Discretionay Account
-7.60%
-5.34%
10.16%
16.45%
17.13%
2.63%
15.14%
-5.26%
3.33%
5.43%
4.16%
1.74%
Heng Seng Index
-7.71%
-3.51%
5.97%
14.33%
17.07%
1.14%
11.94%
-4.13%
6.24%
3.81%
0.32%
0.23%
Date
1/2010
2/2010
3/2010
4/2010
5/2010
6/2010
7/2010
8/2010
30/9/2010
Discretionay Account
-6.13%
4.01%
7.25%
-1.11%
-6.99%
0.33%
12.24%
-0.60%
15.11%
Heng Seng Index
-8.00%
2.42%
3.06%
-0.62%
-6.36%
1.84%
4.48%
-2.35%
8.87%
Monthly Return
Investment Performance Record for
Discretionary Account

Investment Performance Record for
Discretionary Account

Annual Return

Date

10

12/2006

2007

2008

2009

1

9/2010

Discretionary Account

14.93%

61.03%

-
46.51%

69.87%

24.11%

Alpha

N/A

31.19%

10.07%

13.94%

21.45%

Hang Seng Index

13.80%

39.31%

-
48.27%

52.02%

2.22%

HSBC Global Investment Funds
--
HK
Equity



46.60%

-
49.00%

58.30%

-
6.80%

Investment Performance Record for
Discretionary Account

Cumulative Return

Date

1/10/2006
-

30/9/2010

Discretionary Account

108.88%

Hang
Seng

Index

27.45%

Hang
Seng

Total
Return
Index (HSTRI)

42.45%

Asset Management Services Offered
by Quantsmile


Quantsmile has a full asset management licence and offers the
following wealth management products:



Discretionary asset management to all types of investors



Portfolio Management Service as an outsourced fund manager for
private equity fund and fund management company. This service
will utilise the in
-
house developed AIS model to strive for higher
Alpha return


Thank You