Quantitative strategies: integrating the strengths of active and passive investing
TSAI
In the field of financial investment, quantitative strategies are gradually emerging and becoming the focus of many investors. For the TSAI platform, in-depth analysis of the advantages of quantitative strategies can not only provide investors with more abundant investment options, but also help them achieve steady growth of assets in a complex and changing market environment.
Traditional investment methods are mainly divided into active investment and passive investment. Active investment aims to select individual stocks or assets through the professional judgment and market insight of fund managers, and strive to exceed the average market return and obtain excess returns (ie alpha). However, this method relies on the personal ability of fund managers. Not only is the labor cost high, but investment decisions are easily interfered by subjective factors, resulting in large fluctuations in investment performance. Passive investment aims to track market indexes, such as the common investment in the Shanghai and Shenzhen 300 Index Fund, which achieves roughly the same returns as the market by replicating the index constituent stocks. The advantage of passive investment is that it is low-cost, the management fee is much lower than that of active investment, and the portfolio is relatively diversified, which can effectively disperse non-systematic risks, but the disadvantage is that it is difficult to obtain returns that significantly exceed the market average.
Quantitative strategies cleverly combine the strengths of both. It mines and analyzes massive financial data based on mathematical models and computer algorithms, covering historical price trends, trading volume, macroeconomic indicators, company financial statements, etc. With the help of advanced machine learning, big data processing and other technologies, quantitative strategies can accurately capture market rules and investment opportunities, and are not affected by subjective factors such as emotions and biases, ensuring the objectivity and consistency of investment decisions.
From the perspective of obtaining alpha, quantitative strategies have great potential. For example, by building a multi-factor model, quantitative strategies can screen stocks from multiple dimensions such as value, growth, momentum, and quality. In 2022, a quantitative investment team used a multi-factor model to dig out a group of undervalued stocks with high growth potential in the A-share market. The investment portfolio built based on this model achieved a 20% return that year, significantly surpassing the 10% increase in the CSI 300 Index, and successfully obtained considerable alpha returns.
In terms of cost control, quantitative strategies have significant advantages. Because they rely on computer programs to automatically execute trading decisions, they do not require a large amount of manpower for market research and individual stock analysis, which greatly reduces labor costs. According to industry statistics, the average management fee rate of quantitative funds is 0.5% - 1% lower than that of actively managed funds. Taking a fund with a management scale of 10 billion yuan as an example, it can save 50 million to 100 million yuan in management costs each year.
Quantitative strategies also perform well in market risk control. By diversifying investments in multiple stocks, multiple asset classes and multiple markets, quantitative strategies can effectively reduce the impact of single assets or market fluctuations on investment portfolios. For example, at the beginning of the outbreak of the new crown epidemic in 2020, the global financial market was in turmoil, and many active investment funds saw a sharp drop in net value due to concentrated holdings in specific industries or individual stocks. Investment portfolios using quantitative strategies, with their diversified investment characteristics, can adjust asset allocation in a timely manner through algorithms, effectively control risk exposure, and the maximum drawdown is far lower than the market average, and the value of the investment portfolio is relatively stable.
Quantitative strategies have demonstrated strong investment efficiency on the TSAI platform by combining the advantages of active and passive investments. It can not only create opportunities for investors to obtain additional alpha, but also operate at a low cost while maintaining a low level of market risk. In the future investment journey, quantitative strategies will continue to bring investors stable and excellent investment returns on the TSAI platform, becoming a powerful tool for investors to win in complex financial markets.