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Aphilion Q² Quantitative Global Equity Fund November 2013 Jan Holvoet, Nico Goethals, fund managers. Aphilion. Founded in 2000 by Nico Goethals and Jan Holvoet (both ex-KBC) Quantitative research on equities Aphilion Q² Fund: global long-only, since 2001. Quant Models. - PowerPoint PPT Presentation
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APHILION
• Founded in 2000 by Nico Goethals and Jan Holvoet (both ex-KBC)
• Quantitative research on equities• Aphilion Q² Fund: global long-only,
since 2001
QUANT MODELS
• Investment process is based on a set of unique, in-house quantitative models and tools
• Fundamental-based
• Relationship between stock price movements and changes in the fundamentals of the company.
FUNDAMENTALS
• Initially we focussed on changes in consensus earnings estimates = base model
• Gradually more sophisticated: relative changes in earnings (vs. peers, the business cycle, etc…), origin of changes (sales-volume, price), attempts at own estimates…
EXCESS RETURN
• Filter «common factors» out of the stock price
• Principal Component Analysis
• The result is the ‘excess return’, specific to each stock. This must be a reflection of changes in that stocks profit outlook.
OPPORTUNITIES (57%?)
• See through the noise• Correct response (cfr. P/E players)• Capture earnings momentum
VALUE VS. GROWTH?
• « Dynamic value »: the change in the variables matters more than the absolute level
• Model the relationship between changes in the fundamentals of a stock (earnings and sales) and relative price movements.
• Exploit discrepancies
QUANT METHODS
• ROBUST : financial markets are full of outliers (fat tails) that produce misleading results
• DYNAMIC: (risk) characteristics of a stock change over time; give more weight to the recent past
INVESTMENT UNIVERSE
• Universe of more than 4000 stocks worldwide: evenly divided over 3 blocks: US, Europe and ROW
• Including all of the largest stocks by market capitalization
INVESTMENT PROCESS2. Model
- Short-term dynamics- Robust Techniques Result: Equities ranked according to extent over/undervalued
3. Portfolio Construction- Correlations- Neutralise for Market Beta and other Common Risk Factors (sector, currency, oil price, interest rates...)- No ‘blind’ implementation. We are not a systematic fund
1. Quantitative Inputs
- 4000+ live price feeds- Analyst Estimates- Company Financials
4. Aphilion Portfolios
- 70 Long Positions (Q² )-Neutralised for Market Beta and other Risk Factors
PRACTICALAphilion Q²
Launched December 2001
Legal Belgian SICAV, Ucits III
Asset Class Equity
Methodology Quantitatively managed
Directional Long Only
Target Beta 1
Geographical Focus
Global
Type of Investors All (Retail, Prof, Inst)
Minimum Investment
5 000 EUR
• +/- 70 stocks• Regionally balanced• Choose among the best ranked
stocks within each business sector• Model isn’t implemented ‘blindly’.
Qualitative overlay, mainly to check on the quality of data input (‘garbage in, garbage out’).
PERFORMANCE APHILION Q²
• Return since launch: +119.6% vs. market average +2.1 % (MSCI World in EUR)
• In a very consistent/stable fashion: annualised outperformance of ca 6.5% / year
• Outperformance in 10 out of 12 years
Q² VS. BENCHMARK
• Relative performance of Q² (Q² divided by MSCI World, basis=100)
• Good performance in all kinds of market circumstances
• No very long stretches of sub-par performance
• Track record fully intact
VALUE OR GROWTH?
• Relative performance of Q² vs. the relative performance of value vs. growth strategies
• There is no correlation… we aren’t growth, we aren’t value
• Which makes us a good diversification in any long-only strategy
STABLE PERFORMANCE
• “Opportunistic trading”• Over 2000 trades since fund launch• histogram: significant positive mode
(+4.1%)• ‘law of large numbers’ is source of
stable outperformance