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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.
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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 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
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
