Quantifying hedge funds shows that:
How to choose a quantitative hedge fund?
Quantitative hedge fund is an investment product with very high professional requirements for investors. There are three series of quantitative hedging products in the market: public offering, private placement and brokerage asset management. Judging from the data, their performances are quite different. Here are several commonly used quantitative indicators to help investors choose a good quantitative hedge fund.
1. Expected annualized rate of return on investment: mainly depends on the absolute expected annualized rate of return. It quantifies the long-term and short-term expected annualized rate of return of hedge funds and examines whether the funds have sustainable profitability.
2. Maximum retracement: the maximum retracement range of the expected annualized expected rate of return at any historical point in the selected period when the net product value reaches the lowest point.
Maximum retracement is an important index to measure the biggest floating loss suffered by a product in history, or to measure whether a product needs timing when purchasing. Paying attention to the maximum withdrawal rate of the fund can help investors understand the risk control ability of the fund and know the maximum loss range they face. For quantitative hedge funds, this indicator is more important than volatility.
The smaller the maximum extraction quantity, the lower the demand for product timing when purchasing.
The maximum retracement reflects the risk control ability of hedge funds, and it is generally better to control it within 5%. The stop loss line set by quantitative hedge funds is generally 0.92 or 0.93. If the maximum withdrawal reaches more than 7%, it may face the risk of liquidation. If the maximum withdrawal exceeds 8%, it basically shows that the fund's risk control ability is weak and it is not recommended to choose.
Sharp ratio: it is the most commonly used standardized index for fund performance evaluation, and it is one of the three classic indexes that can comprehensively consider expected annualized expected return and risk at the same time. Its formula is
Where E(Rp) is the expected return rate of the portfolio, and Rf is the risk-free expected annualized interest rate.
E(Rp)-Rf: Portfolio return beyond risk-free investment.
σp: standard deviation of portfolio, representing portfolio risk.
Sharp ratio shows how much excess returns will be generated per unit of total risk. 、
Whether at home or abroad, in the long run (at least 1 year), the ratio of 1 or above is good, and above 2 is excellent, that is to say, in the case of small withdrawal, there is a good expected annualized expected return, and funds with a ratio of less than 0.5 are not recommended.
4. annualized volatility. Volatility is an index to measure the historical changes of asset prices and the activity of asset prices in a specific period. Generally, it is the average value of the percentage change of daily closing price of assets over a period of time, annualized.
Annualized volatility is an important indicator to measure the long-term performance of products. The smaller the annualized volatility, the stronger the fund's ability to hedge risks. The higher the annualized volatility, the greater the uncertainty of the fund's expected annualized expected return (the expected annualized expected return may be larger and the loss may be larger).
5. Market correlation, which mainly investigates the correlation analysis between quantitative hedge funds and the market (stock market or bond market) and measures the degree of correlation between them.
Generally speaking, when the correlation coefficient is greater than 0.7, it is considered to be highly correlated. When it is between 0.4 and 0.7, the correlation is low, and it is irrelevant below 0.4. The ideal market-neutral strategic fund should have nothing to do with market performance, that is, the correlation coefficient is below 0.4.