Construct a complete system of values and values.
"It seems that from the beginning of rubber trade, my connection with the futures market has been doomed." Zhu Hongwei, the general manager of Luojie Island Asset Management Co., Ltd. (hereinafter referred to as Luojie Island), the champion of the reorganization of external rights and the first prize of Tokyo Mercantile Exchange, told us that he started trading rubber from 1997, and began to participate in arbitrage between internal and external markets from 2003 to 2006, which is regarded as an early participant in the futures market in the domestic rubber industry.
A
On logic and structural conduction
"Before 2006, I was purely engaged in rubber trading and spot hedging, but after that, as the scale of funds kept up, I began to do internal and external hedging." According to Zhu Hongwei's memory, during the financial crisis in 2008, he suddenly realized the huge influence of liquidity on market prices. At that time, he had just started OTC trading, and he often "lost money abroad" and earned "domestic money", which always puzzled him. Later, it was found that it was a problem of liquidity pricing, that is, from then on, he began to make quantitative investments and gradually introduced some investment management platforms to make programmatic transactions.
Zhu Hongwei told the reporter of Futures Daily that in fact, many logics of programmed trading are linked to the fundamental logic and arbitrage logic of rubber spot. The pronunciation of the name Luojie Island also represents their investment philosophy-all investments should pay attention to "logic" and "structure".
According to Zhu Hongwei, the quantitative trading of assets in Luojie Island is different from others in the market. They must have statistical results and be reasonable, that is, logical. "That is to say, there needs to be a relative reference, which is valid in the past and now and will be valid in the future. This is our logical source. " Zhu Hongwei explained.
Investment logic is essentially an efficiency problem. To measure the efficiency of assets in trading, both short-term and long-term needs to be evaluated at the same time, which can be understood as timing. "The core of winning in the capital market is not to judge how high the winning rate is, but to manage the use of time and funds." Zhu Hongwei said that the essence of investment consists of price, quantity and time. Most people always pay attention to price, but in fact, it is more about quantity and time, thus completing a three-dimensional investment.
B
Zero-sum games should have rules to follow.
From the logic of Luojie Island assets, if an investment institution wants to "live well" in the futures market, it should meet the following characteristics: "First, there are several mechanisms that not everyone can do. It's hard to make money doing what everyone does. After all, the futures market is a zero-sum game. " Zhu Hongwei analyzed that the second is to have active structural risk management, otherwise there will be big risks and extreme events; Finally, the most important thing is to have logical dependence and know what you rely on to gain benefits.
Talking about the logical source of the assets of Luojie Island, Zhu Hongwei said: "We have our own pricing system. To make rubber, we must first make rubber futures. Many things should be considered from the perspective of futures. We must understand the rules and understand the game. "
There are many rules in the futures market, such as delivery rules, rules and regulations of exchanges, etc. "We rely on these rules to do business, because these are solid and certain things. Just as we rely heavily on the delivery mechanism in the futures market, delivery is like the final showdown. Whether it goes up or not is worth the price. We need to open it and have a look. " Zhu Hongwei believes that the delivery mechanism is a very interesting point in the futures market, and forward futures are ultimately made by using the delivery mechanism. At the same time, the futures market can have various expectations. In essence, these expectations are completed by long and short games. Therefore, we should consider the logic of market game-how to choose long and short forces, how to allocate chips, and how to balance their respective income-risk ratios.
In addition, the futures return curve does not exist independently, it always depends on a certain contract carrier. "When we do rubber futures, we need to know what it has to do with the reality of the rubber industry. Spot and futures are always related. On the one hand, it depends on the spread structure, current spread, internal and external spread, near and far contract spread, profitability and correlation. " Zhu Hongwei told the reporter of Futures Daily that, on the other hand, it depends on the subject matter of the contract, that is, the spot level, and there are rules to follow in terms of fundamental driving, inventory rules, transmission of real industrial profits, and characteristics of import and export.
At the same time, we need to consider the macro aspect, which is essentially determined by macro factors for the capital market. Although rubber is a commodity, the futures market belongs to the whole liquidity pricing system, and liquidity is driven by money. "For example, the impact of interest rates on the overall market and the cyclical release of money to entities. The liquidity of the futures market always has two attributes: expectation and showdown. " Zhu Hongwei explained that expectations are speculation and prejudgment; A showdown is to see if the judgment is correct. This is also an important stable basis and reference for investment and trading in Luojie Island.
C
Don't forget that maintaining stable profits and flexible response also requires your initiative.
For traders, participating in real competitions can not only find their own value, but also communicate with many experts. As far as Zhu Hongwei is concerned, his ultimate goal is to preserve and increase the value of assets, and the common combination of time value is the focus of his pursuit. However, the accounts in the market were different before, and the time efficiency was also distributed.
Zhu Hongwei believes that evaluating a person's life is a long-term survival problem, which depends on whether there is a suitable income logic behind it. He said: "We can make money by sustainable value system and perfect asset management methods. Real competition has achieved certain results, reflecting that the account satisfies the desire of the zero-sum market to chase the income risk in a certain period, indicating that our cognition matches the market in a certain period. "
In fact, the futures market is more about pursuing a balance. Although the balance between income and risk is more valuable, many people will pay more attention to performance. "To evaluate a transaction well, there are many indicators in quantitative methods, such as income risk characteristics, indicator characteristics, stability, transaction management response, profit and loss response, etc." Zhu Hongwei said, however, whether a person can survive in the futures market for a long time depends on whether he has some stable laws.
Judging from Zhu Hongwei's experience, in order not to be eliminated by the market, we must first have a professional understanding of the characteristics of the participating varieties, and also realize that we are not "speculating in futures", but operating an investment behavior. "We don't do research to do market analysis, but to reach a transaction result and see if this transaction can gain value and shield risks." Zhu Hongwei believes that trading needs to form a complete system of values and values from the perspectives of value, risk, leverage and liquidity. In the process of pursuing value, we should do a good job in transaction management and maintain vitality.
"The formation of this system is inseparable from learning and summing up, but many things can be obtained without learning and summing up. We have experienced many storms and difficulties since we arrived here today. I think everything that looks shiny is caused by scars from the past. " Looking back, Zhu Hongwei was filled with emotion, and learned from these experiences that some things can't be touched and some things must be avoided.
According to Zhu Hongwei, the value system of Luojie Island's assets has matured for seven or eight years, but it also follows certain principles. First, go with the flow, constantly adapt, and constantly expand their own pattern to enrich this system; The second is to have a core, and the core is the leading factor of the market. He said: "Only by maintaining this core can we establish a complete understanding of the world. The world will never end, but the coincidence of what you are good at and the commonality of the market is stable, so after the storm, Do not forget your initiative mind. "
The core of Roger Island assets lies in the hedging structure. "We may not have any special advantages in the spot and futures markets, but we have great advantages as traders by linking the two and doing some arbitrage of hedging structure." Zhu Hongwei said that they don't classify themselves as traders in essence, but invest in a certain market as investors, and there is no distinction between futures, spot, overseas dollar accounts and domestic RMB accounts. All these are cash flow conversion positions held.
D
To understand the arbitrage world, we must first make clear the factors behind the market.
After more than 20 years of ups and downs in the futures market, Zhu Hongwei feels that the futures market is essentially allocating resources for the real industry, creating high volatility, promoting market changes through liquidity, and promoting efficiency. He said: "Many people are obsessed with betting on long and short positions in the futures market. Many people expect to get high returns or get rich overnight in the futures market, but betting on long and short positions is always paranoid. Seeking high returns is always accompanied by high risks, which is exactly what we want to avoid."
"In fact, the understanding of the futures market can form a complete world view, and many things such as futures, delivery and policies have a relatively complete pattern, whether at home or abroad. We can explore many factors behind the curve changes in the futures market, which can help us enhance our understanding of the world. " Zhu Hongwei believes that on the surface, the subject matter of the futures market is either the investment price, the investment spread or the investment volatility, but the futures market is rich because there are rich elements behind it, and the characteristics of these elements need to be mastered.
"In the real competition, the accounts we participate in are all engaged in arbitrage trading, and rubber is the most important trading variety, mainly considering that rubber is an agricultural product with seasonal attributes." Zhu Hongwei's analysis, first of all, can use the seasonal law to carry out far-near arbitrage; Secondly, starting from the rules of the commodity itself, cost arbitrage can be done. If the price of a commodity is lower than the supply cost for a period of time, there is a liquidity discount, and the delivery cycle of high inventory often meets the price bottom. "Cost arbitrage is to buy when liquidity is insufficient, and gain something when liquidity recovers, which is equivalent to acquiring non-performing assets." Zhu Hongwei said.
Specifically, internal and external arbitrage is based on the conduction characteristics between domestic and foreign varieties. "But this is not simply driven by the futures market, but also depends on the transmission of the industrial chain." Zhu Hongwei mentioned that the most rational things in the market are the supply side and the consumption side-producers always produce at a high price and terminals always consume at a low price, while Luojie Island assets can shield irrational things and find rational dependence in the industrial chain.
In addition to rubber, the assets of Luojie Island will also be deployed in many varieties. "Now that capital is flowing around the world, we will do some arbitrage and hedging of substitutes. The key to choosing which varieties is to see whether it can replace or express the logic we follow and what the market environment we were in at that time was. " Zhu Hongwei believes that if interest rates continue to fall and money continues to increase, it is valuable to do more in the liquidity market.
E
Make good use of the quantitative mechanism and build a system to foster strengths and avoid weaknesses.
At the execution level of the transaction, the assets of Luojie Island basically adopt a quantitative strategy. In their view, quantification itself is synonymous with rigor and efficiency. "It is not the product of the brain, but the unity of logic and statistics." Zhu Hongwei believes that if we adopt quantitative methods at the transaction level, our execution ability will be more certain, we can better remain neutral and realize rational management without psychological and cognitive intervention.
However, quantification is a transaction management system that removes human nature and overcomes human weakness. Considering everything from the capital curve, this system not only manages risks, but also manages efficiency, optimization and combination. Zhu Hongwei believes that although management itself does not create value in essence, avoiding risks does not mean making money, but logically considering the source of real risks. Profit and loss are the same, so risk should be considered from the source of income.
In recent years, unexpected factors and "black swan" events in the futures market have emerged one after another. Zhu Hongwei reminded that the management system also needs to be combined and configured from an extreme perspective, and the extreme response can be divided into pre-risk, mid-risk and post-risk. It is an expected view in advance. The basis risk and the risk at the time of deposit are considered in the event, and it is necessary to constantly adjust and optimize afterwards to match the new changes. The combination of the three is the real system.
"Quantifying products is actually constantly optimizing the sorting. For example, which variety has a large inflow and outflow of funds, we will follow which variety, and we will also optimize the fluctuation and outflow of funds, and anyone who is suitable can participate. " Zhu Hongwei and Kan Kan, if it is arbitrage, will be more rubber; If it is the logic of fundamental promotion and discount, there is no variety restriction; If it is a macro-level strategy, the combination and allocation of large-scale assets is the main logic, and the logic should remain stable, but not necessarily single. After all, zero-sum markets are susceptible to a single logic.
In the process of gradual market development, Roger Island assets no longer adopt pure quantitative strategy. Zhu Hongwei believes that, generally speaking, investment institutions have a variety of strategies to cooperate with each other in attack and defense. There must be a system to deal with value, a system to deal with risk, a system to deal with liquidity and a system to deal with position adjustment. Behind this is actually an investment structure completed by a series of single strategy combinations, but there is also a single strategy of constantly entering and leaving the market many times. "The long-term value and short-term cash flow of any portfolio need to be considered at the same time. Sometimes it seems that a strategy is a list from entry to exit, but in fact it may be cut several times or even a dozen times in the middle of a cycle. " Zhu Hongwei said.
For the holding time of the list, the holding cycle of Luojie Island assets in overseas markets is different from that in China. "For example, in the Japanese market, our trading cycle is longer because its liquidity is not as good as that of China." Zhu Hongwei explained to the reporter of Futures Daily that the same judgment may not have much difference in value, but my transaction cost is one tenth of yours all the year round, so I have surpassed you. Therefore, the internal and external arbitrage of Luojie Island assets is generally short in China and long in foreign countries. "In foreign countries, the current cost and impact cost are relatively high, and the transaction is not active. Constant intervention is to increase management costs. In fact, in many cases, the futures market won or lost not because the value judgment won the value judgment, but because the cost control won the cost control. " Zhu Hongwei concluded.
F
When the liquidity expands, clearly position and take root in the industry.
When domestic private equity funds (PE) went to sunshine avenue, Roger Island Assets also joined the team. "Now, while managing our own funds, we also distribute some products in the market." Zhu Hongwei said that along this road, the assets of Luojie Island also have their own positioning. Starting from the nature of trading, they position themselves as a long-term and profitable investor.
In Zhu Hongwei's view, asset management is the concept of channel, while product development is the concept of leverage. Leverage and channels will change with the changes in the market environment, so we must first position ourselves. In addition, we should also realize that trading in the futures market needs to return to the industrial perspective-avoiding virtual reality.
Since 20 15, the market has stepped out of a new track. In the commodity market, the structural cycle and liquidity cycle are misplaced, and the market game is also strengthening. "To cope with today's market, we need to further enlarge the pattern and consider the problem from a more grand perspective. At the same time, we need to find rational logic from the bottom market. " Zhu Hongwei believes that in the era of high liquidity expansion, we should not always focus on short-term profits, but must have a long-term positioning.
In the next few years, Roger Island Assets also plans to focus on finding an effective investment system that adapts to the current environment. Zhu Hongwei said that commodities are now in the period of integration, and the industrial chain and economic structure are undergoing earth-shaking changes. In the future, whether in the spot market or the futures market, as long as one person's behavior can improve the industrial efficiency of the underlying industrial chain, the market will naturally pay off. After all, economic benefits are ultimately created by the underlying industries.