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AI-Quant Fund Delivers Absolute Returns

The era of "lying flat" is truly gone.

In recent years, most people in our country have gradually become more indifferent to financial management, with the minimum demand being that the principal is still there. But gradually, first the "principal protection" disappeared, then bank wealth management also stopped being guaranteed, and even if you were unlucky, you might suffer losses; and then, even the five-year large-denomination certificates of deposit became a luxury...

It's not just that, the hottest topic in the financial and wealth management circles recently has been ultra-long-term government bonds.

The yield, if put 10 years ago, would have been looked down upon no matter what; who would have thought it would coincide with the economic cycle, making it quite acceptable, but 20 years, 30 years, and even 50 years, it sounds a bit shocking.

So, in an era where the "high yield-low risk-good liquidity" impossible triangle is becoming more and more prominent, is there any path that can at least make us worry less and be less concerned?

The current public fund products, the most mainstream stable income products, are bond funds and some low-volatility fixed income+, but there are really too many of these products, and after really choosing for a long time, you still don't know which one to choose, it feels a bit like aesthetic fatigue.

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But there is such a quantitative fund - Huaxia Antai Hedge Strategy, which is slightly different.

This is a product that uses AI+quantitative for absolute return, which sounds a bit like a gimmick, but let's look at its performance over the years, in the previous long-term difficult recovery, it actually achieved positive returns for several years in a row, which is quite rare.

Smart AI, the most important thing is the algorithm; and a good quantitative fund, the most critical thing is the model. From this perspective, AI+quantitative seems to be more than just a gimmick.A "Very New" Approach to Absolute Return

Quantitative hedging and absolute return are two terms that may still be somewhat unfamiliar to many people. Here, I will provide a brief explanation. However, if you find it too technical, you can skip to the next section.

Absolute return aims for a positive absolute value of investment returns, pursuing "calmness" under various market conditions, focusing on steady growth around the return target, and reducing portfolio volatility.

Quantitative hedging, on the other hand, seeks to minimize the systematic risk of the market and obtain absolute returns through stock selection capabilities. Generally speaking, the returns of a fund come from excess returns (Alpha) and market returns (Beta). In simple terms, what quantitative hedging does is to establish a long position on one side, such as some constituents of the CSI 300 or the CSI 500, and on the other side, build a short position against the index to hedge away the market's Beta.

The Huaxia Antai Hedge is equivalent to an absolute return fund product that completely strips Beta through futures to reflect Alpha. In the stock investment part, it can be understood as a strategy where 300 enhancement, 500 enhancement, and 1000 enhancement each account for 1/3, and then Beta risk is hedged through futures.

This strategy can achieve positive returns in years when the market is rising, that is, the Alpha returns generated by the fund manager's long position in stocks, but it may underperform the index. However, in years when the market is falling, the strategy begins to exhibit "anti-fall" properties, reducing losses.

The returns of such neutral strategy products mainly depend on the manager's excess return level and hedging costs. If the excess level is unstable or the hedging costs are too high, they will directly affect the fund's performance.However, Huaxia Antai's hedging strategy has proven the effectiveness of the strategy with outstanding performance.

According to the Galaxy Securities ranking, Huaxia Antai's hedging strategy currently ranks 1st among similar products in the public offering of quantitative hedging strategies for the past year (1/23), the past two years (1/23), and the past three years (1/23)!

Since the fund was established in June 2020, it has achieved an annualized return of about 5.57%, with the maximum drawdown at -4.67%, and the maximum drawdown recovery date is 34 days. In other words, as long as the holding period exceeds one month, the fund can quickly recover from losses.

Also, due to the setting of the holding period, panic during sharp market downturns is controlled, so most people holding this fund are likely not to lose money.

This kind of hard strength is actually inseparable from AI.

Unlike many traditional quantitative "multi-factor strategies," Huaxia Antai's hedging strategy introduces AI, especially deep learning technology, on the basis of multi-factor strategies to enhance the performance and effectiveness of the model.

To put it simply, it uses AI and massive data (such as historical market trends, industry data, industrial chain relationships, macro data, policy information, etc.) as training samples for machine learning to find targets that are undervalued or mispriced by the market, thereby obtaining excess returns.

In simple terms, it uses AI and massive data, through a model-based approach, to find targets in the market that are undervalued or mispriced, thereby obtaining excess returns.

In the words of fund manager Sun Meng, "you can understand it as we hope to train a fund manager through algorithms."Sun Meng's Quantitative "Evolutionary History"

The use of AI in recent years has become quite widespread.

People have mixed feelings about it. It is indeed useful in many fields, but the maturity of AI directly compresses the upward mobility and growth space for newcomers.

As for using AI and quantitative methods for investment, Huaxia Fund came up with this idea as early as 2017, after AlphaGo defeated Lee Sedol. Later, they also cooperated with Microsoft Asia Research Institute to explore the possibilities of AI-assisted investment.

At that time, Huaxia Fund was the first in the industry to establish an "AI+" investment team, and Sun Meng joined as one of the first members, participating in the research and development and management of multiple projects and products, accumulating rich experience in AI models and strategies.

In fact, before coming to Huaxia Fund, Sun Meng was also engaged in quantitative research in the self-operated business of securities firms. At that time, the most popular strategy was to be long on the ChiNext board and short on the Shanghai-Shenzhen 300. The result of this one-sided bet was that the Shanghai-Shenzhen 300 rebounded violently later, causing the product to retract significantly. This incident also gave Sun Meng a strong sense of risk control.

These experiences have further strengthened Sun Meng's belief that AI and quantitative methods should be well utilized in investment. In his view, such models can not only improve investment efficiency and accuracy but also eliminate the over-reliance on subjective human judgments in traditional multi-factor models. This over-reliance can lead to over-mining of certain factors, resulting in factor congestion and failure, thereby enabling the model to create sustainable, more stable, and barrier-based Alpha for investors.

Sun Meng currently manages 7 funds. Among them, Huaxia Zhongzheng 500 Index Enhancement and Huaxia Zhongzheng 500 Index Smart Selection are the most stringent index enhancement funds; Huaxia Zhisheng Value Growth targets the index enhancement fund of Zhongzheng 500, but there is no limit on the proportion of fund constituent stocks invested in the index constituents, relaxing restrictions and giving Sun Meng more opportunities to select stocks outside the sample to obtain high returns.

Huaxia Hedging Strategy is his first quantitative hedging strategy fund. With the previous groundwork, this fund, which has gradually "carved out" Alpha bit by bit, has gradually matured.

This fund is a fixed-opening fund. Those who regret not being able to buy it before can subscribe from May 17, 2024, to May 23, 2024.In fact, it still surprises me that the Huaxia Antai Hedge Strategy, a quantitative fund, has been able to dominate the field for several years in a row.

Huaxia Fund is strong in the field of passive index investment, which is an undeniable fact. However, in the past two years, Huaxia Fund has delivered impressive results in both active and quantitative fields. They achieved a luxurious record of "two championships, three runner-ups, and one third place" throughout 2023.

From the earliest star fund managers to the index giant and now to the comprehensive development of active equity, quantitative hedging, and overseas mixed QDII, Huaxia has taken solid and steady steps. It feels like Huaxia Fund has been redefining assets over the past few years.

Continuous iteration and never stopping, this is probably one of the important reasons why Huaxia Fund has always been at the top of the list!


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