A deep dive into quantitative investing. - What is quantitative investing? - Exploring factor investing? (what are they?) - Types of quantitative strategies? - Managing Risk - Live demo: start quant investing with Aikido Finance.

1. THE AIKIDO
MASTERCLASS
Start Your Algorithmic Investing Journey

2. NOT FINANCIAL ADVICE
The information contained in this webinar
and any resources included is not intended
as, and shall not be understood as financial
advice. I am not a financial advisor, nor am I
holding myself out to be. Investing involves
risk and investments may lose value. Past
performance is not indicative of future
results. Seek appropriate financial, taxation
and legal advice before making any
investments.

3. THE SCHEDULE
● 45 Minutes: A deep-dive into quantitative
investing
○ What is quant investing
○ Exploring the factors
○ Types of quantitative strategies
○ Managing risk
● 15 Minutes: Live Demo
○ Start quant investing with Aikido
● 30 Minutes: Q&A

4. Investors who want to systematize their investing to reduce stress, and spend
less time researching investments.
Investors who to future-proof their investing and obtain higher returns using
the most modern techniques in the industry.
Investors who want to manage their own portfolio and not rely on an external
manager.
Investors who want to build long term wealth
WHO IS THIS WEBINAR FOR?

5. Shane Monks O’Byrne

8. Quantitative investing involves making investment decisions using a
systematic, data-driven approach based on historical evidence.
Quants attempt to extract intelligence from data to make smarter asset
allocation decisions. While there are various breeds of quantitative investing,
the underlying concept remains constant; exploit data to produce
outperformance - alpha.
WHAT IS QUANTITATIVE INVESTING?

9. THE GROWTH OF QUANTITATIVE INVESTING (SIG)

10. Factor investing chooses securities based on attributes that are associated
with higher risk adjusted returns.
● Enhance diversification
● Generate above-market returns
● Manage risk.
(All with a lot less stress)
FACTOR INVESTING
Quant Investing for Retail Investors

11. STYLE FACTORS
Dividend
Size Quality
Value Volatility
Momentum
Growth

12. VALUE

13. VALUE
Value aims to capture excess returns from stocks that
have low prices relative to their fundamental value.
Discount and bargain-shopping

14. THE VALUE METRICS
🮮 Price / Earnings
🮮 Price / Book Value
🮮 Price / Sales
🮮 Price / FCF
🮮 PEG
🮮 Price / TBV
🮮 Price / NCAV
🮮 EV / EBITDA

15. Value
Fig 1.

16. VALUE

17. QUALITY

18. QUALITY
Quality aims to capture healthy, stable, and consistent
companies with strong corporate governance
Boutique shopping

19. THE QUALITY METRICS
🮮 ROE
🮮 ROA
🮮 ROTA
🮮 ROIC
🮮 ROCE
🮮 ROIC-WACC
🮮 Inventory Turnover
🮮 Accounts Payable Turnover
🮮 Accounts Receivable Turnover
🮮 Pre-tax Margin
🮮 Free Cash Flow Margin

20. THE QUALITY METRICS CONTD.
🮮 Current Ratio
🮮 Quick Ratio
🮮 Flow Ratio
🮮 Liabilities / Equity
🮮 Debt / Equity
🮮 Debt / EBITDA
🮮 Debt / TBV
🮮 EBIT / Assets
🮮 Debt / NCAV
🮮 Long-term Debt / Working Capital
🮮 Interest Coverage Ratio
🮮 FCF / Sales

21. Value
Fig 1.

22. QUALITY

23. MOMENTUM

24. MOMENTUM
Stocks that have outperformed in the past tend to exhibit
strong returns going forward.
Trend shopping

25. SOME MOMENTUM METRICS
🮮 1-month price momentum
🮮 3-month price momentum
🮮 6-month price momentum
🮮 1-year price momentum
🮮 SMA
🮮 EMA
🮮 RSI
🮮 HMA
And many, many more…

26. Momentum
Fig 5.

27. MOMENTUM

28. SIZE

29. SIZE
Portfolios consisting of small-cap stocks exhibit greater
returns than portfolios with just large-cap stocks.
Hipster/Niche shopping

30. Size

31. SIZE

32. VOLATILITY

33. VOLATILITY
Stocks with low volatility earn greater risk-adjusted
returns than highly volatile assets.
Safe shopping

34. VOLATILITY

35. DIVIDEND

36. DIVIDEND
Dividend paying stocks tend to yield better overall returns
for investors.
Passive-income shopping

37. Dividend

38. ?
HOW TO CHOOSE FACTORS

39. MSCI - 20 YEAR PERFORMANCE OF SMART BETA

40. MSCI

41. BLACKROCK

42. OSAM

43. CITRIX

44. RESEARCH AFFILIATES

45. WHAT IS A QUANTITATIVE STRATEGY?

46. Quantamentalist
THE THREE TIERS OF QUANT
Screener Quant Hedge Fund Quant

47. A SCREENER STRATEGY
Price / Sales
< 1
Ranked by
12m price
momentum
Market Cap
Microcap
Rebalance: Yearly # Companies: 25
Weighting: Equal
18.1% Avg. Annual Return
Since 1965
*S&P500 returned 8.79% per annum during this same period.
Backtested returns. Past performance is not indicative of future results
Positive
3m & 6m
momentum
USA
Market

48. 1. Build valuation metrics based off companies balance sheets items using a high
quality data provider
2. Clean and remove outliers of this data and use methods to ensure the data is
point-in-time
3. Combine these valuation metrics together via a weighting scheme (this can be
based on static weights or a rolling regression model)
4. Remove any unwanted exposure of the signal to certain market phenomenon e.g
liquidity, size, market beta, potentially other style factors
5. Analyse every company versus it's peers to create a single ranking number for every
company (we typically use some sort of normalised z-score type metric for this or a
probability cross-sectional ranking)
THE HEDGE FUND APPROACH

49. THINGS YOU SHOULD KNOW

50. Rebalancing Periods are typically 1, 3, 6, or 12 months
Rebalancing your portfolio is an important part of managing your investments.
Rebalancing means buying and selling positions in your portfolio to get back to your
original asset allocation.
When one asset class significantly outperforms another, your portfolio drifts from its
starting allocation.
REBALANCING

51. As the size of a portfolio increases, both
the return and the volatility decrease
In general:
● A 5 stock portfolio yields the highest
return
● A 10-15 stock portfolio yields the
highest risk adjusted return (Sharpe)
● A 15+ stock portfolio yields
progressively lower volatility and
lower returns
NUMBER OF STOCKS

52. Types of Portfolio Weighting:
● Equal-weighted
● Volatility-weighted
● Momentum-weighted
● Value-weighted
● Kelly-weighting (Kelly Criterion)
● Alpha-weighted
WEIGHTING

53. BEFORE YOU JUMP IN…

54. 2. Be Consistent
A GOOD QUANT INVESTOR MUST:
1. Think Long Term and be Patient

55. There are many parts to a full/diversified portfolio:
● Property
● Bonds
● Equities
● Crypto
● ETFs
● Commodities
● Alternatives
Your Quant portfolio is one part of your overall portfolio
Up to say 50-60%
WHERE DOES A QUANT PORTFOLIO FIT IN?

56. “Diversification is the only free lunch” in investing
- Harry Markowitz
1. Run 2 or more quant strategies at a time
2. Diversify across the factors
3. Diversify across asset classes
4. Diversify across geographies (Coming soon)
DIVERSIFICATION OF A QUANT PORTFOLIO

57. There are a few important metrics to look at when picking a strategy.
● Worst decline / drawdown (Peak to Trough)
● Volatility (Risk)
● Sharpe ratio (Risk vs. Reward)
● Beta (Market correlation)
● Base rates (how often it beats the market in rolling periods)
RISK METRICS OF A QUANT PORTFOLIO

58. HOW TO START
QUANT INVESTING WITH
AIKIDO

59. Retail Investors have little access
Building a Quantitative Investment
Portfolio has a Very High Barrier to Entry
Due to:
Financial Knowledge
Data-Science & Coding Experience
Time-Consuming
High Capital Requirements
High Costs / Fees
Technology
THE PROBLEM

60. Investors who want to systematize their investing to reduce stress, and spend
less time researching investments.
Investors who to future-proof their investing and obtain higher returns using
the most modern techniques in the industry.
Investors who want to manage their own portfolio and not rely on an external
manager.
Investors who want to build long term wealth
WHO IS AIKIDO FOR?

61. LIVE DEMO

62. Q&A
20% off Aikido with the code MEETUP20