Investment strategy under interest rate hike and quantitative index
Last year, investors generally faced the dilemma of negative asset growth, but the performance of investment products and funds using quantitative strategies was significantly better than that of other strategies, and there were many outstanding performers.
In 2022, the global financial market will come to a bleak end. The global stock market index will drop by 18%, and the bond market index will drop by 16%, which is a rare drop in both stocks and bonds in recent years. Although there are many factors responsible for the huge market volatility, the Federal Reserve’s hawkish monetary tightening policy can be said to have the deepest impact. Looking at the annual performance of various investment products, the investment income of quantitative strategies is much higher than that of other strategies.
So, will the Fed change its rate hike policy? Can quantitative strategies still lead in 2023? What kind of quantitative strategy products will be better? With the above questions in mind, the author interviewed Mr. Chen Baixuan, the investment director of “Huiying Fund Management Company (SPC)” and the fund manager of “Huiying AI Quantitative Arbitrage Fund”.
The possibility of the Fed cutting interest rates before the end of the year is slim.
Inflation in the United States will soar to a 40-year high in 2022. The Fed changed its previous rhetoric and stance and started raising interest rates by the most since the 1980s.
At present, the inflation rate in the United States is slowing down. The data shows that its core inflation rate has peaked, but there should be a long way to go to reach the Fed’s inflation target. Chen Boxuan believes that under the current circumstances, the Federal Reserve will adopt a relatively moderate strategy in terms of monetary policy, by implementing several small interest rate hikes to keep the key interest rate at about 5% in 2023, so as to avoid a hard landing of the economy risks of. Of course, the probability that the Fed will cut interest rates within this year should be minimal.
The selection of trading assets and the advantages of quantitative strategies
Mr. Chen said that in the past 10 years, in order to promote economic growth, all major economies have basically implemented quantitative easing strategies. Asset classes bring investment opportunities.
Mr. Chen believes that investors generally face the dilemma of negative asset growth in 2022, but the performance of investment products and funds using quantitative strategies is significantly better than that of other strategies, and there are many outstanding performers. Quantitative trading is a type of trading that focuses on using algorithmic models and data analysis to identify trading opportunities, make investment decisions, and improve profitability. The characteristics and advantages of quantitative trading include: the results of data and algorithm models can be verified, and investment emotions and biases can be overcome; superior to human experience and judgment, and obtain excess returns; more diversified strategies can be managed, and larger size of funds, etc. Therefore, even in periods of extreme market volatility, it can bring stable returns to investors.
How to judge the pros and cons of quantitative strategy products or funds
To share the ideal returns brought by quantitative trading, Chen Boxuan suggested that investors should consider the following three aspects:
1. Whether they are equipped with industry-leading quantitative models and AI trading systems. Different from traditional investment, quantitative investment has the characteristics of low market correlation and low volatility. Excellent quantitative models can identify multi-asset trends in a timely manner and capture trading opportunities through massive data and different strategy models. The AI trading system with machine learning capabilities can learn from data without programming, which can provide a powerful reference for investors to identify products.
2. Whether to find the management team of quantitative strategy products or funds. Quantitative trading models require professional technical talents, but this alone is far from enough. Only top technical experts and financial experts with practical experience can guarantee the quality of products or funds through strong cooperation and operation.
3. Comparison with the performance of other quantitative funds in the same industry. The investment return of many quantitative products or funds can only match the trend of their corresponding tracking index or benchmark index. Excellent products or funds can keenly track and capture asset trends, and can dynamically combine the situation in recent months to disperse trading allocations to different markets and assets around the world (such as currency and gold, etc.), and finally complete an upgrade. At the same time, it is supplemented by strict risk control, that is, each transaction order has a take-profit and stop-loss control, which will effectively control the maximum drawdown of the investment portfolio, achieve low risk and low volatility, and Get the absolute return you want.