01, standing on a high post
It's been a thrilling year for a quantitative fund with trillions under management. The investors who are up and down in it are also mixed.
The market has picked up after the Spring Festival this year, and the net value of some investors' products has "turned red", but some investors who bought at the high point of quantitative private placement in 2021 are still standing on a high post.
Recently, several investors told "City Boundary" that Lingjun, one of the "Four Kings of Quantitatives" of private equity that they purchased, invested in quantitative products and suffered a considerable loss.
Li Xuan is one of them. In April 2023, under the leadership of her wealth manager, she and several other investors visited Lingjun Investment's office in Beijing. "When we visited their company, we said that Lingjun was very large, with a large number of investment and research personnel, with an average of one engineer for every two researchers, and that Lingjun also had a machine room in Inner Mongolia. In addition, at that time, we also inspected another head quantitative private placement, and the allocation of that one was not as high as Lingjun, so we bought Lingjun Pilot Preferred No. 1 for 1 million. To Li Xuan's dissatisfaction, on February 19 this year, Lingjun Investment was punished by the two stock exchanges. As of March 29 this year, she has accumulated a loss of 19.05% on the product in one year.
▲ (Photo provided by investors)
Ding Ding bought it through the agency China Merchants Securities in February 2021 earlier: "One tracks the CSI 500 Index, called Lingjun Zhiyuan CSI 500 Quantitative Index No. 8, which lost about 12% as of mid-March this year, and the other is called Quantitative Stock Selection Pilot No. 12, with a loss of 35%. Ding Ding believes: "In the last week before the Spring Festival this year, the CSI 500 index rose by 12%, and the CSI 1000 index also rose sharply, and it is really incomprehensible that they can make losses in this situation." ”
The same is true for Wang Yi. In July 2021, under the recommendation of her financial advisor, she bought "Lingjun Xinyi CSI 500 Index Increase" with a total investment of 1 million yuan. Wang Yi told "City Boundary" that she originally planned to make a long-term investment in this money, but after holding it for 2 years and 7 months, she could only sell it because the product performance was not as good as expected.
"I held it for a total of 31 months and lost about 12% in October 2022, when I didn't redeem because I believed that the company's fundamentals had not changed and that I could win it back. In addition, in the total 20 months from the opening of redemption in July 2022 to the end of February this year, the month-end net value of 13 months was less than 1, accounting for nearly 70%. This is equivalent to giving me only a 30% chance to make a profit, but a 70% chance to lose. Finally, at the product open day at the end of February this year, Wang Yi chose to redeem with one click.
Ding Ding and Wang Yi both bought quantitative products in 2021, which is also the stage of rapid development of quantitative private equity in China. Previously, in 2019, the China Securities Regulatory Commission (CSRC) promoted the refinancing business of public funds and expanded the scope of the two financial standards, which greatly enriched the types of quantitative investment strategies. Since 2021, institutional investors have been optimistic about and concentrated on holding certain large-cap stocks or industry leaders, and quantitative strategies such as index increase, short index, and neutral have reshaped quantitative beliefs with the support of artificial intelligence and machine learning technology.
According to the estimation of CITIC Securities, by the end of the second quarter of 2021, the total assets under management of the domestic quantitative securities private equity fund industry have crossed the "1 trillion" mark. With the rapid development of the quantitative market, strategies such as CSI 500 Index Enhancement, CSI 1000 Index Enhancement, and Air Index Enhancement have been recognized by more investors, and have gradually developed into the "main battlefield" of quantitative private placement.
For example, the "Lingjun Zhiyuan CSI 500 Index Increase" and "Lingjun Xinyi CSI 500 Index Increase" purchased by Ding Ding and Wang Yi are all products tracking the CSI 500 Index, while Lingjun Quantitative Stock Selection Pilot No. 1 and No. 12 are air index increase products, that is, they are not benchmarked against any specific index, nor are they subject to the constraints of index constituents, industries, market capitalization, etc., but use quantitative models to carry out stock selection operations in the whole market, pursuing excess returns and absolute returns.
On the whole, index enhancement strategy and quantitative stock selection strategy are the two more important product lines of Lingjun at present. According to Ma Zhiyu, chief investment officer of Lingjun, at an investor communication meeting in mid-March this year, the total management scale of Lingjun is about 50 billion yuan, of which the total scale of the index increase strategy is about 19 billion, the quantitative stock selection strategy represented by the pilot product is about 15 billion yuan, and the neutral strategy and multi-strategy are about 8 billion yuan each.
02. Where does the loss come from?
Since August 2023, some traditional quantitative strategies have begun to face challenges as the market style has switched from small to large caps. The high-frequency volume-price strategy encounters a bottleneck in the context of reduced market volume and increased competition, while the index enhancement strategy is difficult to obtain excess returns in the case of reduced market volatility.
Especially since February this year, the quantitative private equity industry has encountered a liquidity crisis. Many quantitative products have experienced significant drawdowns due to market volatility and liquidity issues, especially in small and micro cap stocks. This liquidity crisis has led to a sharp decline in the net value of some quantitative products, and even forced liquidation and liquidation.
Lingjun, who was criticized by investors, also suffered a performance drawdown in this context. Among the 60 CSI 500 Index Enhancement Products counted by the private placement network, from the beginning of this year to March 22, Lingjun CSI 500 Index Enhancement No. 2 ranked in the bottom 10% of excess returns. In addition, among the 21 comparable peer products, Lingjun's quantitative stock selection pilot premium No. 1 is not optimistic from the perspective of the returns of three comparison dimensions since the beginning of this year, the last one year and since its establishment.
▲ (Source/Private Placement Network)
Regarding the reasons for the poor performance of its products, Ma Zhiyu said at the investor communication conference in mid-March: The market has continued to pull back in the past two years. "Because quantitative long products are operating in full positions, when the market has a big fall, the product will also face relatively large losses, which is a major reason. "Coupled with the fact that the small-cap index fell more before the Spring Festival, Lingjun's quantitative long products have not performed well since 2024.
A quantitative industry insider also told "City Boundary": "The performance of quantification comes from Alpha + Beta, since the second half of 2023, the beta income representing the market performance has fallen too fiercely, and the alpha representing excess returns cannot fill this hole at all." ”
Another point of view pointed out: "At present, the net value of some products of Lingjun is slowly repaired, which may be that it cut off the small and micro disks in the stock market crash before the Spring Festival." There are some private placements that rebound very weakly after cutting small and micro disks, and those that have not adjusted rebounded quickly. ”
A practitioner told the "City Boundary": "Before the Lunar New Year, Lingjun's positions should be shrunk in the constituent stocks, and when the small tickets rebound after that year, Lingjun wants to transfer from the constituent stocks to the small tickets, so it needs to sell the big tickets first and then switch to the small tickets, so it has the behavior of quickly switching positions, but this behavior is too aggressive." ”
He further explained that since the introduction of the new quantitative regulations in September 2023, quantitative institutions have become the focus of regulatory attention. "Especially for companies with a scale of more than 10 billion, because of their large scale and large potential impact on the market, all quantitative institutions have basically received phone reminders from the exchange. ”
In the practitioner's view, the reason why Lingjun will concentrate on selling in the first minute of the opening on February 19 may not be that Lingjun itself has subjective malice and wants to smash the market or lose money. "It may be that several, dozens of investment managers (PMs) have their own individual strategies, and there is no overall planning in the final transaction link; ”
"City Boundary" noticed that Cai Meijie, chairman of Lingjun Investment, also said at the investor exchange meeting in mid-March that Lingjun's quantitative long products were all operating with full positions, and even on February 19, they were net buying. "The reason why it happened was that the entire investment research team wanted to upgrade the model, and they worked overtime to upgrade without rest during the Spring Festival. In this process, there is a relatively large need for position adjustment, so in the first minute of trading on the opening day, there is no balanced trading and smoothing effect. ”
03, the lucky one has turned red
After the great development in 2019~2021, the total scale of quantitative private placement in mainland China has rapidly expanded from 100 billion yuan to trillion yuan. According to the statistics of CITIC Securities, as of the end of 2023, the scale of quantitative private equity funds will be about 1.63 trillion yuan, and the scale of quantitative public offerings will be about 0.32 trillion yuan, an increase of about 60 billion yuan from the end of 2022.
However, with the rapid development of the quantitative private equity industry and the intensification of market competition, the transformation of newly established quantitative private equity companies and traditional private equity has made the market more crowded and more difficult to obtain excess returns. In addition, after 2024, the market has shown signs of switching from small tickets to large tickets, and the CSI 300, which has been suppressed for more than two years, began to counterattack;
Therefore, on February 5th ~ 8th, the panic selling of funds pulled the major indices to smash out of the stage of new lows. The Wind Micro Cap Index plunged 34.90% in the 10 trading days before and after, carrying a large number of quantitative managers to collectively encounter Waterloo. According to public information, from the beginning of this year to February 8, the average decline of CSI 500 index enhanced products in the whole market was 15.52%, with an average excess return of -10.98%, the average drawdown of CSI 1000 index growth was 20.43%, and the average excess return was -6.22%, the average decline of quantitative stock selection was 15.17%, and the average decline of market neutrality was 4.16%.
▲ (Wind Micro Cap Index trend in the last 1 year.) Photo source/Wind)
Those tens of billions of quantifications that we are familiar with are powerless to resist in the face of this drawdown. Taking the CSI 500 index increase product as an example, China Merchants Securities statistics show that on February 4th ~ 8th, the excess returns of Jiukun, Yanfu, Siyi, Mingtun, etc. were all negative. At the specific product level, in the first two months of this year, the income of Jiukun Rixiang CSI 500 Index No. 1 was -12.06%, the income of Lingjun Enterprising No. 1 was -11.49%, and the income of Innova CSI 500 Index No. 1 was -8.68%.
The same is true for air finger additives. In the first two months of this year, the return of Longqi Quantitative Stock Selection No. 1 was -19.24%, Century Frontier Quantitative Preferred No. 1 was -10.65%, and Lingjun Quantitative Stock Selection Pilot Premium No. 1 was -32.11%.
However, on the whole, the A-share market showed an over-falling rebound trend in the first quarter. In the first quarter of this year, the Shanghai Composite Index closed up 2.23%, ending three consecutive quarters of decline, and the Shenzhen Component Index has risen 14.47% since February.
At the same time, the performance of many quantitative managers has also begun to turn red. According to the research report of Tianfeng Securities, as of March 22, the absolute rate of return of strategic products such as Century Frontier Neutral, Derivative Neutral, and Mingtun Neutral has been positive. If calculated from the quantitative climax in 2021 to March 22 this year, there are also managers such as Zhicheng Zhuoyuan Neutral, Chengqi Neutral, and Black Wing Neutral who have given beautiful absolute returns.
▲ (Source/Tianfeng Securities)
The "market circle" has noticed that with the return of the market to rationality, except for a few quantitative private equity companies such as Yanfu and Kuande, the scale of most quantitative institutions has stabilized, and some quantitative managers have even taken the initiative to reduce the scale.
According to a research report by Guolian Securities, the former "Four Heavenly Kings of Quantitative" - Magic Quadrant, Jiukun, Mingtun, and Lingjun, now only the scale of Jiukun and Mingtun is still about 60 billion, and the latest scale of Lingjun is 50 billion, and High-Flyer has shrunk to about 28 billion. The above-mentioned industry insiders told "City Boundary" that the scale of High-Flyer has declined a lot, which may be that the company is actively shrinking its asset management business.
▲ (Source/Guolian Securities)
After all, it is a few lucky people who can quickly repair it in a short period of time, and there are still many investors who bought the quantitative highs in 2021 in a state of loss. The above-mentioned investor told "City Boundary": "Lingjun promised to open the redemption of all products in April". At that time, how will investors choose?
(Investors Li Xuan, Ding Ding, and Wang Yi are pseudonyms)
Author | Lu Chunfeng
Edit | Han Zhongqiang
Operations | Liu Shan