At the beginning of 2024, quantitative private equity, which has been making steady profits, has encountered headwinds.
*The Times reporter learned from relevant sources that the net value of many quantitative private equity products fell sharply last week, especially the quantitative index enhancement products with the largest market size, which recorded the largest weekly decline and excess drawdown in history.
According to the reporter's understanding, many index enhancement (hereinafter referred to as index increase) products under tens of billions of quantitative products fell by as much as 10% to 17% in a single week, that is, the excess return was -2% -4%, and the rare negative excess surprised many investors. The quantitative strategy, which has been stable in excess returns, has suffered a sharp drawdown, which has attracted much attention from the market.
Significant drawdown of equity.
In the past few years, due to the excessive stability of the index enhancement strategy, many quantitative private placements have completed scale expansion with the help of the stable performance of the strategy, and a number of private placements have grown into tens of billions of private placements. Among them, many quantitative teams have begun to favor small-capitalization stock selection, and have benefited from this, and many quantitative private placements have performed well last year.
However, since the beginning of the year, the small and medium-sized market capitalization has suddenly fallen, especially micro-cap stocks, which has exceeded the expectations of many quantitative teams.
Last week, the CSI 500 Index and the CSI 1000 Index were **923% and 1319%, and the net value of many quantitative private equity products has retreated sharply. **The Times reporter learned from relevant sources that many index products under the 10 billion quantitative index increase products fell as much as 10% to 17% in a single week, that is, the excess return was -2% -4%, and the rare negative excess surprised many investors.
Taking the CSI 500 index increase products as an example, last week, the products of tens of billions of private placements such as Wenbo and Qilin fell by as much as 14%, with an excess of nearly -6%, and Yunqi fell by 17%, with an excess return of -8%; Among the CSI 1000 index products, a product under Wenbo has a single-week ** of nearly 17%, and the excess return is -37%。
Dragged down by micro-cap stocks**.
Why did the quantitative strategy, which had previously had a stable alpha, suffer a sharp drawdown recently? Li Zheteng, a partner of Liangdao Investment, said that from a market perspective, it is due to the adjustment of small market capitalization, especially micro-cap stocks. From the beginning of 2021 to the present, the Wind Micro Cap Index has come out of a 3-year round of magnificent **, in which many quantitative private equity managers' stock selection portfolios have benefited from micro-cap stocks, which has continuously self-reinforcing and formed a positive feedback mechanism, and finally in this wave of ** in early 2024, the positive feedback was blocked, triggering a large excess drawdown of related products.
From the subjective perspective of quantitative managers, the insufficient understanding of the volatility characteristics of the A** field and the inflexible risk control mechanism are the reasons for the failure of this kind of response. Li Zheteng said.
A head quantitative person in Shanghai said that in the past year, small-capitalization stocks have brought excess returns, but in fact, bad money drives out good money, resulting in a high proportion of small receipts, and this round of strict risk control team will perform much more steadily. Of course, there have been recent outperformers in the large-cap style.
Sun Enxiang, the project leader of Paipaiwang Wealth Partners, said that the main reason for the recent drawdown of the index increase products is that on the one hand, the broad-based indices such as CSI 300 have withdrawn less, mainly because the weighted stocks have been ** for nearly 3 years, and the recent protection funds have also mainly flowed into the weighted stocks. The index increase products represented by small-cap stocks such as the CSI 1000 have performed well in recent years, and their excellent excess returns are due to the large exposure of market capitalization, so they have significantly underperformed the index recently. On the other hand, the snowball products that are superimposed against the CSI 500 and CSI 1000 continue to be knocked in, and the quantitative hedging strategy and DMA (quantitative ** leveraged through the brokerage's proprietary trading platform) strategy have suffered large losses due to the widening of the basis, and then encountered redemption risks, so the quantitative institutions that have been full of positions all year round have also been forced to reduce their positions, resulting in irrationality in the market**.
Exposing a problem is not necessarily a bad thing.
Micro-cap stocks and DMA strategy products were two of the hottest concepts in the market last year.
It is understood that the market value of micro-cap stocks is often small, generally less than 3 billion yuan. Wind Micro Cap Index is an index compiled by Wind, and the constituent stocks of the index are the 400 smallest stocks in the market by market capitalization every day**. DMA strategy usually refers to the trading mode in which private equity managers hedge and increase leverage through income swaps with brokers, which is mainly a market-neutral strategy with 2 times 4 times trading leverage.
Li Zheteng reviewed this round of micro-cap stocks** to reporters, and it has gone through three stages: first, from the beginning of 2021 to June 2023, micro-cap stocks have gradually outperformed the CSI 2000 Index from being undervalued; Second, from July 2023 to the end of 2023, micro-cap stocks began to accelerate their outperformance of the CSI 2000 and gradually self-reinforced, forming a positive feedback mechanism. Third, at the beginning of 2024, there was a huge drawdown in the relative returns of microcap stocks.
It is understood that in this round of micro-cap stocks, the excellent performance of small-capitalization factors has once again attracted widespread attention in the market, and at the same time, the domestic quantitative industry has begun to popularize the volume-price machine learning model, which naturally has a tendency to favor small-capitalization stock selection, and thus began to benefit.
*In the first half of 2023, the concept of micro-cap stocks has begun to penetrate into the market, and many managers have gone through the mental process of 'questioning micro-caps, understanding micro-caps, and joining micro-caps', and the exposure of market value factors has gradually increased. In the second half of 2023, the outperformance of similar strategies continues to attract new capital, pushing the earnings of micro-cap stocks higher. The confidence of some managers has been increasing, and they have even shouted the slogan of 'extreme microdisk'. Li Zheteng said.
When a style is overcrowded, there is a negative feedback in the market. The last time it happened in early 2021 was the collapse of the white horse stock huddle, and this time it was the turn of micro-cap stocks.
A person in charge of private equity in Shenzhen told reporters that the first micro-cap stock has made the quantitative private equity net value of holding more micro-cap stocks retreat sharply. DMA products with micro disks, even if there is a futures index hedge, but due to the characteristics of high leverage, once there is a drawdown, the net value drawdown will be more obvious.
The above-mentioned head quantitative person in Shanghai said that the exposure of the problem of small-capitalization stocks beta ( ) is not necessarily a bad thing, and the development of the industry still depends on investment research rather than luck. In the future industry, whoever does a good job in risk control will be more likely to develop sustainably.
Where data can't, experience and intuition come into play. We have built a dynamic risk control mechanism, taking micro-cap stocks as an example, when the first micro-cap stock crash occurred on December 8, 2023, our model has begun to actively reduce the style exposure of micro-cap stocks, and finally in early 2024, the exposure limit of micro-cap stocks was adjusted to the lowest position we set. Li Zheteng said. (Reporter Xu Xiaoru).
Trainee Editor: Li Wenyu |Review: Li Zhen |Supervisor: Wan Junwei.
*:*Times).