This strategy seeks to outperform European market indices such as the STOXX® Europe 600 index over an investment horizon that corresponds to an entire market cycle (3 to 5 years). It is designed to take advantage of the opportunities offered by stock on bull markets while protecting capital during risk-averse phases.
These asymmetrical returns allow the fund to significantly outperform market indices over the long term, with less volatility. The strategy is not designed to replicate the STOXX® Europe 600 index or any other. Rather, it is intended to offer an investment alternative that better meets client needs.
The strategy takes a quantitative investment approach, the fruit of more than 12 years of trading and R&D applied to asset management, combining fundamental analysis with the principles of investment rationalization and risk management used in behavioral finance.
The investment process addresses four key objectives:
- Enjoy the best opportunities during market upswings.
- Protect the capital in adverse periods.
- Rationalize investment decisions through a quantitative approach.
- Guarantee serious, disciplined investing through a proprietary technology.
We consider that the value creation process on stock markets consists in picking the best buying opportunities during market upturns, while being able to pull out and be opportunistic in risk-averse phases. In short, to having good timing.
We believe that in bull markets, certain shares, often grouped by sectoral or thematic criteria, draw strong interest from sophisticated investors. With hindsight, these equity baskets are often the most promising investments, significantly outperforming the markets overall.
Inversely, in phases of strong market stress, selectivity is much less of a factor. The capacity to divest or completely pull out of the markets and to be opportunistic becomes the effective solution to protect capital.
- The effectiveness of the investment process is less about the predictive power of the models than about rationalization and risk management.
- The process is not based on identifying undervalued investments in order to sell them at a higher price, but rather on identifying the most promising investments, acquiring them at a reasonable price and selling them at a higher price.
- The ability to pull out of the market holds as much value as the selection of one asset over another.
Building sector baskets
- The stocks of the investment universe are grouped according to a classification that corresponds to an economic reality. To ensure liquidity of investments, the classification chosen is the ICB (Industry Classification Benchmark), used in the STOXX® Europe 600 supersectors and compliant with UCITS III diversification criteria.
- The strategy invests in all of these representative market sectors (15 to 19).
- It recommends a simultaneous investment across an average of 5 to 8 sectors, generally moderately correlated to ensure greater diversification.
- Investment in one sector generally accounts for less than 18% of global assets, with a maximum of 25%.
Spreading the risk
- As part of our statistical approach, the positions taken on various sectors are adjusted so that they contribute equally to global portfolio performance.
- The appropriate amount for investing in each sector is calculated using the Risk Unit concept.
Accumulation of Risk Units
- The allocation is dictated by market trends. The accumulation of the position in the sector is triggered when trend confirmation levels are exceeded.
Primary strategy risk management
- Risk management is inherent in any trend capture process.
- Statistically, less than one attempt in two leads to the capture of a truly bullish trend.
- In order to restore a chance of positive gain, it is necessary to control losses resulting from unsuccessful attempts.
- Each attempt contains a predefined level of invalidation that leads to immediate liquidation of the position.
- The portfolio and the sectors observed are constrained by a maximum number of allocatable Risk Units.
Second strategy risk management
- Intrinsically, the secondary strategy takes advantage of sudden market downswings.
- This strategy uses the same risk allocation and management mechanisms as the primary strategy.
- Average annual return of 8 to 13% net of fees.
- Annualized average volatility less than 8%.
- Strong capital appreciation in bull markets.
- Effective protection of capital in bear markets.
- Average ex-ante beta: 0.08.
- Daily VaR less than 2%.
Nineteen sectors as defined by the STOXX® Europe 600 supersectors (primary strategy) and Euro STOXX® 50 index (alternative strategy) traded via Eurex® futures contracts or alternatively via iShares® ETF.
Transactions are executed virtually automatically.
Risk management is entirely integrated in the investment process.
- All sectors observed are potential investments.
- The positions are accumulated in a sector if the trend is confirmed, and abandoned if invalidated.
- The strategy recommends investing in 5 to 8 sectors on average that are generally weakly correlated.
- Investment in one sector accounts for less than 18% of global assets, with a maximum of 25%.
- Positions on different sectors are adjusted in order to contribute equally to the global performance of the fund.
- Average holding period of 1 month.
- Maximum leverage: on rare occasions, the primary strategy may borrow up to 100% of NAV. The secondary strategy is limited to 50% of NAV.
Reasons for investing
- A successfully managed quantitative investment process.
- Maximized exposure to equities via the most buoyant sectors at any given moment.
- Protection of capital in case of market downturns.
- Transparency of processes implemented.
- Liquidity of investments.
- Innovative know-how and a proven technology platform dedicated to investment.
The information presented in this document is non-binding and is only intended for knowledgeable physical persons or legal entities that belong to the category of professional investors. Past performances are not a reliable indicator of future performances. The figures in this document refer to past performances and must therefore not serve as the main basis for an investment decision. Quantics Technologies may not be held liable and no legal proceedings may be brought against it due to errors, omissions or inaccuracies contained in this document. The information presented in this document may not be reproduced without the written consent of Quantics Technologies.