Trading in the Year of the Dragon has just begun, and quantitative trading has once again been pushed to the forefront.
Before the Spring Festival, in the context of large fluctuations in the A** field, many quantitative products suffered heavy blows, and the excess drawdown was large. According to the data, at least more than 100 quantitative private placement products exceeded 10% in the week before the holiday, and some products have given up last year's annual gains, including tens of billions of quantitative private placement products. After this round**, 85% of quantitative private placement products are currently in the red.
Regarding the drawdown impact of the quantitative industry, a number of private placements of 10 billion yuan such as Jiukun Investment and High-Flyer Quant have recently issued explanations on the operation of their products, reflecting and reviewing the recent net value drawdown of their products. So, what are the reasons for the large drawdown of quantitative products this time? What are the problems behind it?
Quantitative products have suffered heavy losses.
Since 2024, the A** field has once again entered the adjustment, and the previous small and micro disk style with unlimited scenery has "braked" before the festival. According to the data, as of February 8, the Wind micro-cap stock index has fallen by 27 percent this year49%, which has fallen by nearly 30% in just over a month; CSI 1000 and CSI 2000 Indices were respectively ** 49% during the year.
Under the style turn, a number of quantitative private equity products have retreated sharply. Wind data shows that as of February 20, more than 4,800 quantitative private placements** with data have lost an average of 342%, and the proportion of products that have withdrawn is more than two-thirds. So far, the average loss of quantitative private placement** since the beginning of this year is 807%, and loss-making products accounted for more than 85%.
Among them, more than 130 products have fallen by more than 20% since February, of which the quantitative long strategy is the hardest hit area of the rout, accounting for more than 60%. For example, Zhipin Longtiangui Quantitative No. 2 and Xincheng Quantitative Quadratic No. 1 both exceeded 50% in this range; The drawdowns of Hengsui Foundation Evergreen - Family Exclusive No. 3 and Xincheng Quant No. 1 both exceeded 45%.
Judging from the situation in the week before the holiday alone, wind data shows that from February 5 to 8, there were 149 quantitative private placements** that fell by more than 10% in a single week, including 50 quantitative long strategy private placement products. Some of these products have lost more than the return for the whole of last year. For example, Mengxi CNI 2000 Index Quantitative No. 2 Single-week **3187%, compared to a full-year 2023 return of 1124%。
After this round of **, the number of quantitative private placements that fell by more than 20% during the year has exceeded 530, and 120 have fallen by more than 30%. The reporter noted that in the segmentation strategy, the products tracking the CSI 500 and CSI 1000 indices dragged down significantly, and the average decline of the two during the year was06%。
Many of them are products of tens of billions of quantitative private placements. For example, Jiukun Qianyu CSI 1000 Index Enhanced Exclusive No. 7 and Jiukun Qianyu CSI 1000 Index Enhanced Exclusive No. 8 under Jiukun Investment have respectively ** 35% since the beginning of the year; High-Flyer Quantitative's High-Flyer 500 Index Enhanced Xinxiang No. 21 and High-Flyer 1000 Index Enhanced Xinxiang No. 2 both exceed 20%.
The reporter noticed that not only quantitative private placement products, but also public quantitative offerings have a similar situation. Wind data shows that as of February 20, the average annual decline of 499 quantitative** (only the initial ** is calculated) with data is 768%, and 30 ** products have withdrawn more than 20% this year.
Among them, Dacheng Dynamic Quantitative A, Sino Multi Strategy, and CITIC Prudential Multi Strategy A all fell by more than 10% in the week before the holiday, and the cumulative returns of these three products this year were -3807%、-34.58%、-28.61%, the largest decline. And in 2023, they have all achieved positive returns, which also means that in just over a month, they have given up last year's gains significantly.
Why the massive drawdown?
Due to the extreme value of some quantitative products in terms of net value drawdown and excess drawdown, it has caused dissatisfaction and panic among some investors, and quantitative trading has once again been pushed to the forefront. Recently, a number of leading private equity firms have successively released product operation descriptions to reflect on and review the recent net value drawdown of their products, and strengthen communication with investors.
The above-mentioned Jiukun Investment said that since 2024, especially since late January, the A** market has come out of a continuous extreme differentiation of large and small caps that exceeds the historical extreme**. For quantitative, short-term performance has been greatly impacted, mainly due to extreme style and cost side.
On the long side, the diversified investment approach of the quantitative strategy will not concentrate most of the positions within the index constituents, and although we will strictly control the exposure of large- and small-cap factors in our risk control measures, we are still adversely affected by the strong differentiation of styles. Jiukun Investment said that the market ushered in the first week before the Lunar New Year, but the main gains were concentrated in several broad-based index constituents, and the small and medium-sized market capitalization was still under pressure.
High-Flyer Quant also has a similar expression: "The overall positions of quantitative institutions are relatively scattered, and the index enhancement strategies are all market-wide stock selection and then fitting and tracking the corresponding broad-based index according to historical data, such as our single product holdings are basically more than 2,000, and a large part of them are in small and medium-sized market capitalization. ”
Many of the quantitative index increases operating in the market today, especially the CSI 500 and CSI 1000 index increases, are in fact market-wide stock selection, rather than strictly selecting stocks within the index constituents. Some private equity insiders also told reporters that the index enhancement strategy, as the mainstream strategy of quantitative investment at present, will generally run with full positions and be greatly affected by market fluctuations.
Taking Jiukun Investment's products as an example, from the perspective of average holding style, the average market capitalization style of the 500 index increase product is between the CSI 500 Index and the CSI 1000 Index, and the average market capitalization style of the 1000 index increase product is between the CSI 1000 Index and the CSI 2000 Index. That is to say, in the case of highly dispersed positions, when encountering extreme historical ** with very concentrated gains, the proportion of large rises** that can be participated in is not high, and the long strategy is affected by this large excess drawdown.
So, in the face of market style change, how should quantitative products do a good job in risk management and reduce the range of drawdown? In addition to market factors, what are the other reasons for the retracement of quants**?
In the view of High-Flyer Quantitative, the main reason for the large excess drawdown of the product is that the response to different environmental strategies is not ideal, "Considering our strategy, we have not shown good adaptability in the face of short-term extreme markets, and the gap between the portfolio and the index based on the whole market stock selection structure is large, forming an obvious excess drawdown; The drawdown exposes that the strategy needs to be optimized in terms of factor iteration and risk control management."
The reporter noticed that in early February, there was a public offering to respond to quantitative products. On February 1, Guojin ** said in a "letter to Guojin Quant ** investors" that "the occurrence of a drawdown does not necessarily mean that there is a problem with the effectiveness of the model, and the excess performance needs to be observed in a certain time range".
IFC** believes that market drawdowns are a normal phenomenon, and neither traditional investment nor quantitative investment can avoid it. Market volatility is persistent, and while the model has been fully tested and optimized, at some point, the market environment may switch ways beyond past thresholds.
Yanfu Investment said that it did not adjust the risk control parameters in this round of ** process, and traded normally in a consistent style. As for the reason for this operation, it said that according to the experience of several alpha liquidity crises in the history of U.S. stocks and the collective sharp drawdown of alpha in A-shares at the end of 2014, as long as the product is not passively terminated due to liquidation, touching the stop-loss line and other reasons, and does not artificially interfere with the quantitative model, the final excess will be naturally repaired in a short period of time.
Editor-in-charge: Liu Anqi |Review: Li Zhen |Supervisor: Wan Junwei.
*: CBN).