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The sharp decline of micro-cap stocks repeats the quantitative crisis in February?10 billion quantitative private equity managers: this time is different

The sharp decline of micro-cap stocks repeats the quantitative crisis in February?10 billion quantitative private equity managers: this time is different

Following the sharp decline on April 15, micro-caps and small-capitalization stocks accelerated their diving on the 16th.

The collapse of micro-cap stocks around the Spring Festival, the redemption of quantitative products, and the stampede formed by managers or active or passive selling, which eventually led to a sharp decline in the net value of quantitative products. How will quants respond to this risk this time?

"This time it's different. A 10 billion quantitative private equity manager told Yicai that the biggest feature of the "quantitative crisis" a year ago was the superposition of various incentives such as "market style transformation", "snowball knocking in", and "holding small and micro cap stocks". After the last round of crisis, some quantitative managers changed their contracts, lowered the stop-loss line, and some reduced the risk of exposure to small and micro disks, which may lead to the failure of the factors of the crisis to form a "joint force".

"DMA (leveraged neutral products) can control leverage, and I don't think index enhancement products need to intervene. The above-mentioned manager told reporters.

Sacrifice excess returns in exchange for performance stability

Small-capitalization and micro-cap stocks fell sharply for two consecutive days. On April 16, the A-share market once again experienced extreme conditions. As of the close, more than 5,100 stocks fell in Shanghai, Shenzhen and Beijing, and 1,699 stocks fell more than 9%.

Among them, small and micro cap stocks have become the "hardest hit area", and the Wind micro cap stock index continued to open low on the basis of yesterday's sharp fall of 8.88%, and finally closed down 10.55%, down more than 32.78% this year. The CSI 2000 Index closed down 7.16% and fell 10.94% in two days.

After the last round of small and micro market crisis, some leading quantitative managers have taken some precautionary measures.

"At present, we have been more strict about the exposure risk of small and micro cap stocks, and we have made some precautions in advance. A quantitative private equity manager with a management scale of more than 20 billion yuan told the first financial reporter.

According to the reporter's understanding, "the tightening in the first quarter is aimed at the exposure of small and micro disks" is a common phenomenon in the industry.

In the current situation of general decline, there are also some quantitative traders who have decided to change their trading strategies.

"In the future, we should use more fundamental quantitative strategies in our products and abandon some high-frequency strategies. A quantitative strategy trader told the first financial reporter. He said that the fundamental quantitative strategy, the statistical arbitrage strategy and the high-frequency strategy are the three major strategies classified according to the forecast period.

The so-called "fundamental quantitative strategy" is based on the data information of the company's fundamentals (including the company's financial data), making a mathematical model, and then making predictions. Using more fundamental models means longer forecast periods, lower turnover rates, and lower alpha for companies.

This means that the above-mentioned quantitative traders exchange a part of the excess returns for the business stability of their products.

He's not alone. Tang Yu, a senior quantitative practitioner, also converged his product holdings to the benchmark constituent stocks, reducing the proportion of external stock selection of constituent stocks and the exposure window of various styles.

However, converging the holding style into the constituent stocks also means sacrificing some excess returns.

Hao Kang, head of investment research in China of Ruilian Group (Ruilian Group is the parent company of Ruilian Jingchun), also said in a recent interview with the media that considering the basic characteristics and policy background of China's capital market, under the policy guidance of the new "National Nine Articles" and the "Programmatic Trading Regulations", the exploration of fundamental factors and alternative factors by quantitative investment institutions will become more and more important in the future.

According to him, as a foreign private equity institution emphasizing the integration of fundamentals and quantification, Ruilian Jingchun will further strengthen the research on fundamentals such as "smart beta" and the development of low-frequency fundamental factors in terms of strategy development, and will better integrate with its own quantitative models in terms of macro factors and market style factors.

Modify the contract and lower the stop loss line

The above-mentioned 10 billion quantitative private equity managers told Yicai that the stock price of micro-cap and small-capitalization stocks did not fall at the same time.

Looking back at the last round of "quantitative crisis" before and after the Spring Festival, from January 1 to January 22, the "national team" Huijin continued to buy CSI 300 ETF, and the market style gradually shifted from small tickets to large tickets. From January 22 to January 26, the snowball knocked in, and the CSI 300 index stopped falling and rebounded, but the CSI 500 and CSI 1000 snowball knocking in expectations increased, and speculative bears sniped.

From January 29 to February 2, the liquidity crisis of small receipts appeared. After the snowball knocked in, the futures index discount widened rapidly, the neutral strategy began to close the position, and the bullish part concentrated on selling led to a further decline in the small ticket, at this time, a large number of neutral products and index increase products have seen a large excess drawdown.

From February 5th to February 7th, the "national team" bought a large number of CSI 500 ETF and CSI 1000 ETF, the futures index rose sharply and the basis fluctuated sharply.

On February 8, the micro-market liquidity crisis eased. Huijin began to buy 2000 ETFs, DMA liquidation ended, funds gradually began to buy over-falling stocks, and some quantitative products that had survived the crisis were able to repair some losses.

"In addition to reducing the exposure of small and micro market styles, after the last round of crisis, some managers have modified contracts and lowered the liquidation and stop-loss lines, so their products will not easily touch the liquidation and stop-loss lines, so the crisis of concentrated liquidation or position change will not easily appear. The above-mentioned 10 billion quantitative private equity manager said.

It is difficult for quantitative institutions to completely avoid risks

Although some managers have controlled the exposure risk of small and micro caps, they cannot fully avoid risks for quantitative products that select stocks in the whole market.

Egret Asset Management once told the first financial reporter that for products benchmarking the CSI 500 Index, the common practice in the industry is to select stocks in the whole market (the constituent stocks of the CSI 500 Index are about the stocks ranked 300~800 in the market, and there are nearly 5,000 stocks in A shares, that is, about 80% of the stocks have a market value smaller than the constituent stocks of the CSI 500 Index).

At the same time, because the quantitative strategy holdings are very dispersed, the number of positions often reaches 1500~2000 stocks or more, at this time, in the case of market-wide stock selection, unless the model has a special preference, it is inevitable to hold a certain proportion of small-capitalization stocks, and it is not determined by subjective tendencies. Egret Asset Management said.

According to the private placement network, with the rebound of small and micro cap stocks in March, stock quantitative long products (also known as: index enhancement products) achieved positive excess for the first time this year, but because the index was mainly shock-based, there was not much increase, so the income of stock quantitative long products in March was mainly contributed by over-contribution. Based on the rebound in March, the quantitative long excess and return decline of stocks in the first quarter narrowed, -3.39% and -4.14%, respectively, of which 588 products achieved positive returns in the first quarter, accounting for 27.45%.

Results rebounded, but market panic remained.

On the evening of April 9, the news of the huge redemption of a quantitative private equity "big factory" in Beijing attracted market attention. It is reported that the private placement involved in the rumors is Beijing Hande Investment Management Co., Ltd. (hereinafter referred to as "Hande Investment"), and the product that was redeemed is Hande Jinxuan Quantitative Mixed Phase 1 Private Securities Investment Fund.

On the afternoon of April 10, Hande Investment clarified on its official Weibo that the proportion of the so-called "large redemption" amount is actually small (more than 500 yuan), which has no impact on daily operations, and the performance of the company's related products in the past period is normal.

"Huge redemption is the term of fund product contract, and every fund contract has it, triggering huge redemption, and it is also normal for the company to make an announcement. This kind of normal redemption has aroused widespread concern in the market, which is undoubtedly a true reflection of the current market panic. A quantitative private equity manager told the first financial reporter.

Today, after the quantitative institutions have once again experienced small and micro markets, their performance is still declining.

"In the context of the 28 market (20% of stocks rose and 80% of stocks fell), the excess performance of us and our peers in the past two days was negative. A person in charge of the 10 billion private equity brand department told the first financial reporter.

Time will tell where the story will play out this time, and whether the coping strategies of quantitative institutions are really effective.

(This article is from Yicai)

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