The futures index market has recently ushered in a long-lost continuous premium, which means that the long-short pattern is undergoing subtle changes.
In the new market environment, it is becoming more and more difficult to obtain excess returns from quantitative products, and it has a huge impact on the performance of neutral strategies. This phenomenon has attracted attention.
Relevant data show that since September, the overall performance of quantitative hedging products has been poor, and the returns have been negative. Looking at the extended cycle, the returns of such strategies have also shown a downward trend. There are many reasons behind this.
Some institutional people pointed out that as the hedging end cost of the neutral strategy, the premium of the futures index is good for the new position opening strategy, and investors are advised to subscribe.
However, whether such a conclusion can be established depends largely on the next market changes.
The futures index continued to rise
Since the beginning of September, the stock index futures market has continuously experienced rising water.
As of the close on the afternoon of November 30, the main contract of the Shanghai and Shenzhen 300 Index futures closed at 3860.4 points, and the Shanghai and Shenzhen 300 Index reported 3853.04 points. The futures index was 7.36 points higher than the current index; 7.65 points.
Mengxi Investment told a Chinese reporter from a brokerage firm that behind the rising water, it may be that it is relatively difficult to obtain excess in the current market, and there is not much room for arbitrage. If there are more futures discounts, in order to avoid the risk of futures basis contraction, there will be more Funds choose to close their positions, causing the discount to shrink, and eventually the premium.
When the person in charge of Sixie Investment analyzed the phenomenon of futures index premiums, he pointed out that the changes in the futures index basis were mainly affected by the long-short forces. The large-scale layout and the warming up of long-term enthusiasm have led to the breaking of the long-term dominant position of the short-sellers, and the long-short forces have gradually reached a balance, and even the bulls have the upper hand.
Quantitative excess decline, hedging strategy income decline
"Although the performance of quantitative strategies this year is much better than that of subjective stock strategies, the performance is still somewhat fluctuating compared to previous years. Especially in the recent period, the excess returns of quantitative strategies have declined sharply, and the performance of various institutions has differentiated. With the strategy picking up, the entire quantification track is also facing certain pressure.” Some channel sources said.
According to Mengxi Investment, since September this year, the market environment has been relatively weak, which has affected the excess returns obtained by the quantitative index growth strategy to a certain extent. It is not good, which has a certain impact on the excess returns obtained by volume-price quantitative index growth strategies; secondly, recently, stocks with large market capitalization are significantly better than stocks with small market capitalization, especially the performance of China Securities 500 is better than that of small stocks, while many domestic quantitative institutions are still It is more inclined to stocks with small market capitalization, which makes it more difficult to obtain excess returns; moreover, the sector returns vary greatly, and the style rotates frequently, which makes it more difficult for quantitative institutions to capture excess returns.
Quantitative hedging strategies are also under pressure from market changes.
According to data from the private equity ranking network, 907 market-neutral products with performance records in the past three months have an overall return of -1.35%, and 257 of them have achieved positive returns.
In the long run, the returns of such strategies also tend to decline.
The 789 market-neutral products with performance records in the past year have an overall return of 0.35%, of which 463 have achieved positive returns; the 600 market-neutral products with performance records in the past two years have an overall return of 10.41%, Of these, only 494 achieved positive returns.
A quantitative private equity person in South China said that since September, the sentiment of the entire stock market has been very sluggish and fragile. After the release of the third quarter financial report of large-cap stocks, their performance has exploded, and small and medium-sized stocks are not optimistic. The day reversed and fell sharply, so it is more difficult to quantify the excess of this kind of market; the market trading activity has declined in September, and the average turnover of the two cities for the whole month is about 700 billion, which is about 30% higher than that of the previous month. Decline, not friendly to high turnover strategies.
In terms of stock neutrality, hedging costs have also been enlarged. The basis difference of the stock index futures hedging end has converged or even corrected, resulting in some floating losses. Since September, neutral products have incurred losses of nearly 2%-3%.
Buying opportunities for neutral products?
The stock neutral strategy is a more stable absolute return product than the stock long and index enhanced strategies. By using hedging tools to hedge its own market volatility risk, the portfolio can effectively resist market fluctuations.
This type of product is known for its solid returns, so the recent volatility is also of particular concern.
An analyst who has been tracking quantitative strategies for a long time said that after the listing of domestic stock index futures, the neutral strategy has developed rapidly, but in recent years, such products have gradually stabilized or even shrunk, the overall income has declined significantly, and the competition among various managers has become increasingly fierce. It is getting more and more "volume", and the share is concentrated to the head institution.
In the long run, under the general trend of declining quantitative excess returns, the scale of neutral strategies may further decline.
In fact, most quantitative institutions now no longer simply pursue alpha, but ask for income from beta, such as issuing index enhancement products, or increasing style exposure in stock selection.
Some institutional people have suggested that it is a good time to buy neutral products.
The person in charge of Sixie Investment said that in the past long-term discount state, the hedging of the neutral strategy meant costs and dragged down the strategy's income, but now that the futures index has turned into a premium, hedging can actually increase the income. As far as the neutral strategy of warehouses is concerned, futures index premiums will undoubtedly be positive.
Mengxi Investment also believes that the stock index futures discount is the hedging cost of the neutral strategy, and the long-term stock index futures discount, the cost of the neutral strategy is relatively high.
Recently, stock index futures have continued to converge, or even rise, and the hedging cost is negative. If the excess does not change, it will directly increase the yield of hedging products. Therefore, the neutral strategy is good.
"Only from the hedging side, buying neutral products when the futures index is in a premium will indeed help increase returns. But there is a premise here, that is, the basis structure will remain stable and even return to the previous state of discount. If it is like 2014 At the end of the year, the market style changed drastically, and the premium continued to expand. Investors who bought early may still face a lot of pressure. In addition, if the stock market really continues to pick up, the attractiveness of stock products is obviously more attractive than that of the Chinese market. Sexual products are much bigger.” said the above-mentioned analysts.
(Brokers China)