Text |Giant tide small luke.The once-bullish quantitative private equity giants have begun to apologize.Edit |Yang Xuran.
Because of the tragic net value drawdown before the Spring Festival to apologize to investors, a number of tens of billions of quantitative private placements in just one week suffered an excess drawdown of more than 10%, Lingjun, Century Frontier, Hangzhou Longqi and other institutions urgently issued product operation instructions after the holiday to review and reflect on this incident.
Because of the abnormal trading to apologize to the regulators and investors, Ningbo Lingjun issued an announcement in the early morning of February 21, apologizing for the negative impact caused by the huge sale at the opening of the market on February 19. Prior to this, the Shanghai and Shenzhen stock exchanges had taken measures to restrict Lingjun from trading and initiated disciplinary proceedings to publicly reprimand him.
Recalling that in the second half of last year, the major quantitative private placements were still passionately refuting the accusations of shareholders about "quantitative shorting", saying that they had a large trading volume, high return on investment, and strong value discovery ability, which were an important force to support the development of A-shares.
The bursting of the bubble of the myth of quantitative trading is one of the most important and far-reaching events in the investment market at the beginning of 2024. Ordinary investors are more concerned about how the investment ecology of the capital market will evolve after quantitative heavy supervision.
01 When the development of quantitative private placement with huge drawdowns in China in 2022-2023, it finally began to attract attention with a much higher performance than other public and private placements. In 2023, among the top 10 10 billion** private placements in terms of performance, 8 institutions will adopt quantitative strategies, while 15 of the top 20 10 billion** private placements will be quantitative private placements.
In 2023, the average excess return of domestic ** quantitative long private equity products will be 1374%, the excess returns of the three types of quantitative index growth strategy products of CSI 300, CSI 500 and CSI 1000 are respectively. 55%, quantitative neutral strategy also performs better because it can hedge market beta risk and portfolio risk.
However, this year, the performance of quantitative private equity has changed dramatically.
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%.
Even the mysterious, can't buy the self-operated products and quantitative DMA strategy products of large quantitative manufacturers, also suffered heavy losses, some proprietary losses as high as 20% to 50%, and even some brokerages who just want to earn a handling fee and channel fee have also been affected.
Some people ridiculed that quantitative private equity can finally go through the mental journey of subjective bulls.
At that time, everyone was guided by the belief in value investment to hold ** liquor stocks and pharmaceutical stocks, and the result was that A shares took the big ** "drinking alcohol and taking medicine", regardless of the income of the people, the manager made a lot of money anyway.
The trick played by the public offering ** quantitative private placement will also play, using last year's small-cap stock structure**, many DMA products with 2-4 times the leverage to trade micro-cap stocks, "eye-catching" performance has also triggered the research and layout of various brokerages.
There are more people buying micro-cap stocks, and from a statistical point of view, it seems that there is really investment value, even if many people know that the ** of micro-cap stocks cannot and should not be sustained.
Li Zheteng, a partner at Liangdao Investment, pointed out that "many quantitative managers do not subjectively chase micro-cap stocks, but also because the market constantly feeds back to the machine learning model through data, gradually increasing the probability of selecting micro-cap stocks, and finally buys more and more." ”
But the lie will not come true if it is said a thousand times, and the proprietary and DMA products of the quantitative manufacturers are long micro-cap stocks by increasing leverage, with hedging the CSI 500 stock index**, and the result is that the CSI 500 index rose sharply before the holiday, ** the bears suffered heavy losses, the micro cap stocks collapsed, and the **long stocks were **, and finally suffered heavy losses.
At the same time, the problem of congestion in the quantitative private equity track is also exposed, from the snowball that exploded earlier to today's micro-cap stocks and DMA strategies, the enthusiasm attracted by quantitative private equity is always a swarm of influx into the same strategy, and the result of crowded trading is not only less arbitrage space, but also aggravates volatility, distortion and risk concentration.
When extreme ** occurs, the same strategy, high factor crowding, and imperfect risk plan will only lead to the flight of funds and the drawdown of net worth, and it is wrong whether there is manual intervention or not.
As a leading quantitative private equity firm reflected in the product operation description, what should be done later is to continue to optimize the details of the strategy model and adhere to its own requirements for risk control.
02 The overhaul strategy was when the quantitative private equity companies were busy explaining the reasons for the drawdown and calming the investors' emotions, and Lingjun was punished by the Shanghai and Shenzhen stock exchanges for abnormal trading, which gave the quantitative private equity companies a slap in the face, so that some practitioners even called this the "darkest moment" of quantification.
Lingjun was punished this time, mainly because he sold 2.5 billion yuan** in one minute (the transaction amount of the two cities on the same day was about 50 billion), during which the Shanghai Component Index and the Shenzhen Stock Exchange Component Index fell rapidly. Exchanges clearly see this high-intensity selling trade as a significant force of selling pressure that has a negative impact on the stock index.
This is also the first time that the exchange has decided to impose penalties after the introduction of the new regulations on programmatic trading in September last year, and said that it will continue to strengthen the monitoring and analysis of quantitative trading, especially high-frequency trading, with six major measures, further consolidate the customer management responsibilities of the company, and improve the self-discipline management and cooperation mechanism with the ** industry association and the ** industry association.
From the perspective of international experience, overseas markets generally implement stricter supervision of quantitative high-frequency trading, after all, this is still speculation hidden under the skin of the computer in essence. It is also necessary for China to draw lessons from the practice of international market regulation to prevent negative impacts on market order.
Although many quantitative private placements do not rely on high-frequency trading to win, Lingjun's punishment still gives new enlightenment to industry institutions, that is, when controlling multiple accounts to perform trading operations through computers and strategy models, more consideration should be given to the impact on the market, so as to smooth the transaction, balance the transaction, and reduce the impact on the market.
The head quantitative private placement has said to ** that after seeing the news that Lingjun was punished, he "changed his strategy overnight", and the initial plan was to change the trading frequency in some specific time periods to reduce the frequency of triggering trading. After experiencing market volatility and regulatory escalation, adjusting strategies has become a top priority for quantitative private equity.
After all, quantitative private placement needs to have the ability to quickly adapt to market changes, and restricting high-frequency trading may reduce the sensitivity of quantitative private placement to market fluctuations, fail to capture the small differences in the market, reduce the effective capacity of the strategy, and lead to a decline in the performance of the strategy under a larger scale of funds.
In addition, the new regulations on securities lending and borrowing announced before the Spring Festival, that is, the suspension of the new scale of refinancing securities, the strict prohibition of providing securities lending to investors who use securities lending and borrowing to carry out intraday rotation transactions (disguised T+0 transactions), and the use of securities lending and borrowing transactions to carry out improper arbitrage and other violations of laws and regulations will be cracked down on in accordance with the law, which will also have a great impact on quantitative high-frequency long-short strategies.
Considering the extreme turbulence of the A** market and the panic of investors before the policy was introduced, the prohibition of T+0, which is not conducive to the fairness of investment, is basically in line with the expectations of the industry.
Although the scale of securities lending and borrowing quantified for T+0 trading in the whole market is expected to be between 20 billion and 30 billion yuan, with the implementation of the new regulatory regulations, the trading demand of the three will be suppressed, whether it is the lender of the source of securities, the borrower of securities borrowing and lending, or the intermediary institutions such as brokerages who do matchmaking, and the scale of securities lending business has been relatively low at this stage.
After restricting securities lending and shorting, there will be no short counterparty, and many bulls will not open positions, thus limiting the development space of many strategies, such as quantitative neutral strategies, which are not very affected, will also face the problem of rising costs.
Even from the perspective of preserving their own benefits, quantitative private equity has to develop new strategies.
As of February 22, the Shanghai Composite Index was close to recovering the 3,000-point mark, the Shenzhen Component Index regained the 9,000-point mark, and the CSI 300 rose for eight consecutive years, hitting the highest ** point of the year, and pointed to 3,500 points.
Strong ** has become the subjective feeling of many shareholders, but has the turmoil in A-shares really calmed down during this period of time?
In the past, it seemed that the "snowball, neutral strategy, index enhancement, DMA" series of thunderstorms triggered the index and **drastic**, but the fundamental reason behind the appearance is the extreme interpretation of the early market style and the liquidity risk caused by the high homogeneity of multiple quantitative strategies.
For a long time, the performance of quantitative private equity is highly dependent on ** and trading volume, and the stock selection model is similar and ignores the fundamentals has become a stubborn disease.
Taking the neutral strategy as an example, the European and American capital markets pay attention to "beta neutrality", which means that the beta coefficient of a portfolio is 0, that is, the return rate of the portfolio will not be affected by the overall market fluctuations. In China, it is basically a fake neutral to buy small caps, empty **, beta and style thunderstorms, and it is not difficult to understand that the car finally overturned.
However, with the recovery, the small-capitalization varieties below the CSI 2000 have begun to stop falling, which is likely to mean that the congestion of the small-capitalization track is decreasing, and the liquidity risk is also expected to be lifted. Just like a *** incident, once the congestion point is dredged, then this passage can still be used for people to walk normally.
Some people in the industry even believe that the previous extreme ** will inevitably blow up some quantitative products and private placements, just to make some arbitrage space for this already a bit crowded track. The quantitative industry is expected to face a reshuffle after this experience, and opportunities and challenges coexist for the future development of the industry.
For investors who are considering whether to redeem quantitative private products, perhaps let the bullets fly a little longer to see if the net value can be repaired.
After all, in this quantitative turmoil, there are also some quantitative institutions that have controlled the drawdown, such as Mingshi's neutral strategy because it avoids small market capitalization and micro-cap stocks, especially avoids the bottom 30% of market capitalization** and ST**, and the range return from January 8 to February 8 is -035%, which did not make investors suffer large losses.
Those quantitative product managers who have not experienced significant drawdowns and have won the trust of investors have the opportunity to make a successful transition, re-understand what excess returns are and how to exploit them, and continue to adjust their models while seeking development opportunities.
There are also some managers who will return to self-operation because of the low cost performance of asset management and wealth distribution, and this wave of ** may reset the distribution process, which will avoid the excessive expansion of the scale of quantitative private equity products and exacerbate market volatility.
Finally, let's jump out of this round of turmoil and quantitative trading, and look at the changes from the perspective of the cycle, it is not difficult to find that no one can lead alone, and there is no myth of only winning and not being defeated, and all investors and practitioners must always be afraid of the power of the cycle.