Quantsmile: Quantitative Portfolio
Management
Index

Company Introduction

Why Quantsmile

Quantitative Investment Process
◦ Portfolio Construction
◦ Portfolio Optimization
◦ Execution Management
◦ Risk Management
◦ Rebalancing

Asset Management Services Offered by Quantsmile
Company Introduction

Quantsmile is one of the top leading technology driven
portfolio management companies based in Hong Kong

Quantsmile is using quantitative approach in asset portfolio
management
Why Quantsmile (1)
1. Good Reputation


Being a regulated entity, it has built up its reputation in using
advanced quantitative technology to earn alpha in portfolio
management
It is licensed by Hong Kong Securities and Futures Commission to
conduct asset management business
2. Competitive Advantage


It combines the pro of value investing process of the traditional fund
and risk management solution of the hedge fund, to develop its own
quantitative investment model
With the use of systematic and quantitative “Value Investing”
solution, Quantsmile searches for under-valued companies. Their
share prices would benefit from up-side adjustment of the nonefficient market in short term to the efficient market in long term
Why Quantsmile (2)
3. Investment Team


Quantsmile has experienced portfolio managers and strong
quantitative research team
It has a stable management team, and most of its portfolio managers
have been working together for ten years at Quantsmile
4. Strive for Better Return

Since management team allows research and investment process be
implemented at the unit level, and the responsible portfolio manager
having a degree of autonomy, these enable the portfolio be flexibly
managed for better return
5. Prudent Approach

We aim to minimize investment risk and preserve capital. We build a
diversified portfolio with high quality and undervalued stocks, predetermined constraints set in the model, and the use of derivatives
products to hedge market risk
Quantitative Investment Process
Involves:

Portfolio Construction

Portfolio Optimization

Execution Management

Risk Management

Rebalancing
Portfolio Construction (1)

Top-down investing approach

Over-weight sectors which have outperforming potential

Earn alpha through careful over- and under-weight different
sectors against benchmark
Portfolio Construction (2)

Select stocks within each sector in a value-investing
framework

Quantitative fundamentals (PE, PB, DCF valuation) are
applied in the stock screening process

One year target price will then be calculated based on the
above assessment
Portfolio Construction (3)

Research team provides fundamental studies on each sector
and stocks for inclusion

Investment management committee regularly reviews macro
economic environment variables

Review results will then be incorporated back to the stock
selection process for portfolio adjustment
Portfolio Construction (4)
Input one year of target price and stock volatility
Portfolio Construction (5)
Industry Sector
Portfolio Construction (6)
Over/Under-weighted Sectors
Portfolio Optimization (1)

Selected stocks shall then undergo a series of fine-tuning

Clients’ risk tolerance and return target are part of the
optimization consideration
Portfolio Optimization (2)

Efficient frontier derived from the CAPM model, combined
with optimization parameters, will then generate an
optimized portfolio set for implementation

Constraints with minimum and maximum allowable
portfolio weightings could be imposed
Portfolio Optimization (3)
Constraints with Minimum & Maximum Weighting Conditions
Portfolio Optimization (4)
Portfolio After Optimization and the Efficient Frontier
Execution Management

If market-neutral strategy is selected, delta hedging is
applied to the equities portfolio

By eliminating the market exposure (beta), market outperformance becomes the alpha earned for the portfolio

In executing equities buy and sell orders, quantitative and
adaptative execution algorithm is employed to maximize
VWAP
Risk Management

Quantitative risk control measures such as Value-at-risk
(VaR) are real-time monitored

Portfolio with risk exceeding acceptable level will be
scrutinized and appropriate action will be taken to bring risk
exposure back to accepted level

Up-to-date risk reports are always online and available to
management team for review and actions, as needed
Rebalancing

Market exposure is constantly reviewed and monitored
using advanced reporting tools

When certain exposure parameters have essentially shifted,
dynamic rebalancing techniques will be put into action

To lock in alpha, dynamic rebalancing will strive to adjust
hedging proportion and execute equities buy (at low) and
sell (at high) transactions
Investment Performance Record for
Discretionary Account
Monthly Return
Date
Discretionay Account
Heng Seng Index
Date
Discretionay Account
Heng Seng Index
1/2007
6.90%
0.71%
Date
Discretionay Account
Heng Seng Index
2/2007 3/2007
-0.28% 2.68%
-2.26% 0.76%
4/2007
6.71%
2.62%
10/2006
0.08%
4.45%
11/2006
5.38%
3.47%
12/2006
9.06%
5.30%
5/2007
8.43%
1.55%
6/2007
2.81%
5.52%
7/2007
4.94%
6.49%
8/2007
1.12%
3.45%
9/2007
15.89%
13.17%
10/2007
10.28%
15.51%
11/2007
-6.15%
-8.64%
12/2007
-2.83%
-2.90%
1/2008
-13.56%
-15.67%
2/2008 3/2008 4/2008 5/2008
5.85% -9.36% 13.78% -3.85%
3.73% -6.09% 12.72% -4.75%
6/2008
-9.60%
-9.91%
7/2008
3.43%
2.85%
8/2008
-7.87%
-6.46%
9/2008
-20.45%
-15.27%
10/2008
-24.47%
-22.47%
11/2008
3.46%
-0.58%
12/2008
10.10%
3.59%
Date
Discretionay Account
Heng Seng Index
1/2009
-7.60%
-7.71%
2/2009 3/2009 4/2009 5/2009
-5.34% 10.16% 16.45% 17.13%
-3.51% 5.97% 14.33% 17.07%
6/2009
2.63%
1.14%
7/2009
15.14%
11.94%
8/2009
-5.26%
-4.13%
9/2009
3.33%
6.24%
10/2009
5.43%
3.81%
11/2009
4.16%
0.32%
12/2009
1.74%
0.23%
Date
Discretionay Account
Heng Seng Index
1/2010
-6.13%
-8.00%
2/2010 3/2010 4/2010 5/2010
4.01% 7.25% -1.11% -6.99%
2.42% 3.06% -0.62% -6.36%
6/2010
0.33%
1.84%
7/2010
12.24%
4.48%
8/2010 30/9/2010
-0.60%
15.11%
-2.35%
8.87%
Investment Performance Record for
Discretionary Account
Investment Performance Record for
Discretionary Account
Annual Return
Date
Discretionary Account
Alpha
Hang Seng Index
HSBC Global Investment Funds--HK
Equity
10－12/2006
14.93%
N/A
13.80%
2007
61.03%
31.19%
39.31%
2008
-46.51%
10.07%
-48.27%
2009 1－9/2010
69.87%
24.11%
13.94%
21.45%
52.02%
2.22%
46.60%
-49.00%
58.30%
-6.80%
Investment Performance Record for
Discretionary Account
Cumulative Return
Date
Discretionary Account
Hang Seng Index
Hang Seng Total Return Index (HSTRI)
1/10/2006 - 30/9/2010
108.88%
27.45%
42.45%
Asset Management Services Offered
by Quantsmile
Quantsmile has a full asset management licence and offers the
following wealth management products:

Discretionary asset management to all types of investors

Portfolio Management Service as an outsourced fund manager for
private equity fund and fund management company. This service
will utilise the in-house developed AIS model to strive for higher
Alpha return
Thank You