QuantZ Capital's CEO Milind Sharma discusses his "quantamental" hedge fund strategy that combines quantitative securities selection with a macroeconomic overlay. He has a bearish long-term outlook due to high global debt levels and believes the world is facing a "great stagnation." His fund incorporates this macro view into its models by forecasting probabilities that drive portfolio tilts. He aims to take advantage of increased volatility and correlation in bear markets by tweaking exposures to idiosyncratic and systematic risk factors.
Jeffrey Harlan Penneys, Esq. has a twenty-year history of helping personal injury victims across Pennsylvania recovery compensation and find justice after an accident or attack caused by negligence.
Jeffrey Harlan Penneys, Esq. has a twenty-year history of helping personal injury victims across Pennsylvania recovery compensation and find justice after an accident or attack caused by negligence.
ہاتھ میں لے کے سر بیٹھا ہوں
مولا یہ کیا کر بیٹھا ہوں
میں بھی تیرا بندہ ہوں نا؟
کب سے تیرے دَر بیٹھا ہوں!
اندر باہر شور ہے "مَیں" کا
مَیں تو "مَیں" سے ڈر بیٹھا ہوں
جس کو دیکھ کے جی اُٹّھا تھا
اب میں اُس پہ مر بیٹھا ہوں
ایسا ہُوں مانوس قفَس سے
کاٹ کے اپنے پَر بیٹھا ہوں
مشرق مغرب تُو ہی تُو ہے
ہر جا تیرے گھر بیٹھا ہوں!
- اِبنِ مُنیبؔ
The core objectives of a bank’s treasury are clear; to conduct the asset liability management
process and in particular, to invest in creditworthy assets, to maintain sufficient liquidity and to maximise returns. The challenge is that these
three objectives are not always mutually compatible; as a result the Treasurer and their
team has a delicate balancing act, how to measure and manage these complex factors
and to keep proper control of all the processes.
The economist Joseph Schumpeter once remarked that the top-do.docxmehek4
The economist Joseph Schumpeter once remarked that the “top-dollar
rooms in capitalism’s grand hotel are always occupied, but not by the same
occupants”. There are no franchises, he intoned – you are king for a figurative
day, and then – well – you move to another room in the castle; hopefully not
the dungeon, which is often the case. While Schumpeter’s observation has
obvious implications for one and all, including yours truly, I think it also applies
to markets, various asset classes, and what investors recognize as “carry”.
That shall be my topic of the day, as I observe the Pacific Ocean from Janus’
fourteenth floor – not exactly the penthouse but there is space available on the
higher floors, and I have always loved a good view. Anyway, my basic thrust in
this Outlook will be to observe that all forms of “carry” in financial markets are
compressed, resulting in artificially high asset prices and a distortion of future
risk relative to potential return that an investor must confront.
Experienced managers that have treaded markets for several decades or more
recognize that their “era” has been a magnificent one despite many “close
calls” characterized by Lehman, the collapse of NASDAQ 5000, the Savings
+ Loan crisis in the early 90’s, and so on. Chart 1 proves the point for bonds.
Since the inception of the Barclays Capital U.S. Aggregate or Lehman Bond
index in 1976, investment grade bond markets have provided conservative
investors with a 7.47% compound return with remarkably little volatility. An
observer of the graph would be amazed, as was I, at the steady climb of wealth,
even during significant bear markets when 30-year Treasury yields reached
15% in the early 80’s and were tagged with the designation of “certificates of
confiscation”. The graph proves otherwise, because as bond prices were going
down, the higher and higher annual yields smoothed the damage and even
led to positive returns during “headline” bear market periods such as 1979-
84, or more recently the “taper tantrum” of 2013. Quite remarkable, isn’t it?
A Sherlock Holmes sleuth interested in disproving this thesis would find few
12-month periods of time where the investment grade bond market produced
negative returns.
Bon Appetit!
Investment Outlook
from Bill Gross
June 2016
Investment Outlook | June 2016
But my take from
these observations
is that this 40-
year period of
time has been
quite remarkable
– a grey if not
black swan event
that cannot be
repeated.
2
The path of stocks has not been so smooth but the annual returns (with dividends) have
been over 3% higher than investment grade bonds as Chart 2 shows. That is how it should
be: stocks displaying higher historical volatility but more return. But my take from these
observations is that this 40-year period of time has been quite remarkable – a grey if not
black swan event that cannot be repeated. With interest rates near zero and now negative in
many developed ec ...
Exchange-Traded Proxy Hedge for Jumbo 30yr Fixed MortgagesJohn Coleman
Properly allocated, a basket of Eris Standard Interest Rate Swap Futures, ICE Eris CDX IG Credit Futures, CME Eurodollar Futures and CBOE VIX Implied Volatility Futures may be combined to emulate 30-year Prime Jumbo Mortgage Origination Pricing and Jumbo Rates.
At a roundtable in London, Global Finance brought together key figures
in the subcustody industry to discuss how they are responding to the
many challenges posed by the eurozone crisis, the failure of MF Global,
regulation and the need to expand into new markets and products.
ہاتھ میں لے کے سر بیٹھا ہوں
مولا یہ کیا کر بیٹھا ہوں
میں بھی تیرا بندہ ہوں نا؟
کب سے تیرے دَر بیٹھا ہوں!
اندر باہر شور ہے "مَیں" کا
مَیں تو "مَیں" سے ڈر بیٹھا ہوں
جس کو دیکھ کے جی اُٹّھا تھا
اب میں اُس پہ مر بیٹھا ہوں
ایسا ہُوں مانوس قفَس سے
کاٹ کے اپنے پَر بیٹھا ہوں
مشرق مغرب تُو ہی تُو ہے
ہر جا تیرے گھر بیٹھا ہوں!
- اِبنِ مُنیبؔ
The core objectives of a bank’s treasury are clear; to conduct the asset liability management
process and in particular, to invest in creditworthy assets, to maintain sufficient liquidity and to maximise returns. The challenge is that these
three objectives are not always mutually compatible; as a result the Treasurer and their
team has a delicate balancing act, how to measure and manage these complex factors
and to keep proper control of all the processes.
The economist Joseph Schumpeter once remarked that the top-do.docxmehek4
The economist Joseph Schumpeter once remarked that the “top-dollar
rooms in capitalism’s grand hotel are always occupied, but not by the same
occupants”. There are no franchises, he intoned – you are king for a figurative
day, and then – well – you move to another room in the castle; hopefully not
the dungeon, which is often the case. While Schumpeter’s observation has
obvious implications for one and all, including yours truly, I think it also applies
to markets, various asset classes, and what investors recognize as “carry”.
That shall be my topic of the day, as I observe the Pacific Ocean from Janus’
fourteenth floor – not exactly the penthouse but there is space available on the
higher floors, and I have always loved a good view. Anyway, my basic thrust in
this Outlook will be to observe that all forms of “carry” in financial markets are
compressed, resulting in artificially high asset prices and a distortion of future
risk relative to potential return that an investor must confront.
Experienced managers that have treaded markets for several decades or more
recognize that their “era” has been a magnificent one despite many “close
calls” characterized by Lehman, the collapse of NASDAQ 5000, the Savings
+ Loan crisis in the early 90’s, and so on. Chart 1 proves the point for bonds.
Since the inception of the Barclays Capital U.S. Aggregate or Lehman Bond
index in 1976, investment grade bond markets have provided conservative
investors with a 7.47% compound return with remarkably little volatility. An
observer of the graph would be amazed, as was I, at the steady climb of wealth,
even during significant bear markets when 30-year Treasury yields reached
15% in the early 80’s and were tagged with the designation of “certificates of
confiscation”. The graph proves otherwise, because as bond prices were going
down, the higher and higher annual yields smoothed the damage and even
led to positive returns during “headline” bear market periods such as 1979-
84, or more recently the “taper tantrum” of 2013. Quite remarkable, isn’t it?
A Sherlock Holmes sleuth interested in disproving this thesis would find few
12-month periods of time where the investment grade bond market produced
negative returns.
Bon Appetit!
Investment Outlook
from Bill Gross
June 2016
Investment Outlook | June 2016
But my take from
these observations
is that this 40-
year period of
time has been
quite remarkable
– a grey if not
black swan event
that cannot be
repeated.
2
The path of stocks has not been so smooth but the annual returns (with dividends) have
been over 3% higher than investment grade bonds as Chart 2 shows. That is how it should
be: stocks displaying higher historical volatility but more return. But my take from these
observations is that this 40-year period of time has been quite remarkable – a grey if not
black swan event that cannot be repeated. With interest rates near zero and now negative in
many developed ec ...
Exchange-Traded Proxy Hedge for Jumbo 30yr Fixed MortgagesJohn Coleman
Properly allocated, a basket of Eris Standard Interest Rate Swap Futures, ICE Eris CDX IG Credit Futures, CME Eurodollar Futures and CBOE VIX Implied Volatility Futures may be combined to emulate 30-year Prime Jumbo Mortgage Origination Pricing and Jumbo Rates.
At a roundtable in London, Global Finance brought together key figures
in the subcustody industry to discuss how they are responding to the
many challenges posed by the eurozone crisis, the failure of MF Global,
regulation and the need to expand into new markets and products.
The Hourglass Effect - A Decade of DisplacementFrank Rotman
A ten year look back and view into the future of the Personal Loans industry. Why did the Banks pull back at the same time that Lending Club and Prosper emerged? Why haven't the Banks come back? What's next?
Michael Durante Western Reserve spring 2010 review
Quant Z Bbg Interview
1. This document is being provided for the exclusive use of <milind.sharma@quantzcap.com>
06.19.12 www.bloombergbriefs.com Bloomberg Brief | Hedge Funds 12
Spotlight
QuantZ Capital’s Milind Sharma on Applying a ‘Macro Overlay’ to Quantitative Investing
a slow, gradual thing? in the higher order effects, namely what
Milind Sharma, CEO of New York-based A: We’re really betting on the second does that do to vol and dispersion and
QuantZ Capital Management Ltd., spoke order effects. Regardless of whether you stock correlation and all those things.
to Bloomberg’s Nathaniel Baker about his have the big event or not, it’s going to be The macro stuff translates directly into
views on the global macro picture and how the fact that in the last couple of years
a big unwind because there’s no ways to
these are incorporated into his hedge fund’s you’ve seen record high stock correla-
strategy. get rid of the debt instantaneously. The
real issue near term is whether Angela tion. That makes it very difficult for a
Merkel and Europe can take a page fundamental, bottom-up stock picker to
Q: Your fund was in the top 3 percent in out of our history book from Alexander outperform. The other issue is that when
the Bloomberg database last year and Hamilton’s experience and apply it to Eu- you’re in a sideways to downward bear
recently won the Battle of the Quants. rope. Even if they do, it’s difficult to see market, the typical long/short process
What’s the strategy, exactly? how the world can magically heal itself. doesn’t work well. Because most long/
Because we’re still looking at a potential short funds are essentially levered beta
A: We’re ‘quantamental,’ which means
hard-landing scenario in China, India’s riders. They see a rally, they load up and
a hybrid of quantitative-driven on the
not in great shape with inflation, the jump on. Not to mention that with the
securities selection side with some macro
Japanese have plenty of their own debt pressure on expert networks and Reg
adjustment/macro overlay, if you will.
to worry about and are only 23 years into FD it’s gotten much harder for many of
their bear market, and we’re 13 years into these managers to do what they used
Q: Quantamental. I like that. How does
ours. We see the ‘lost decade’ in stocks to do. Plus, with the relative volume in
the macro overlay work?
– not the one that just happened, but ETFs rising dramatically, you’ve got an
A: It’s taking our house view and environment where a process-driven
the one that’s likely to come – to act like
combining it with a regime-switching ap- strategy can tweak the right levers to
a dampened oscillator. This means that
proach. Basically forecasting probabili- take advantage of these issues.
each successive episode of quantitative
ties, which then drive the portfolio tilt
easing will be less and less effective. As
and overall portfolio orientation. There’s Q: Isn’t there a lot of upwards/down-
an example, this is the third year in a row
a lot of moving parts. wards/sideways movement as we go
that we’ve seen a very serious déjà-vu
script playing out; you get a very strong along here?
Q: So what are your macro views then?
first quarter, market peaks in April or A: Exactly. In general, one should expect
A: We sound like a broken record in May, then you get a summer swoon. For much higher volatility and correlation in
terms of our perma-bearish outlook but the third year in a row we’ve been justi- these bear market cycles. That’s some-
that’s because frankly we see either a fied in being cautious that once the sugar thing a quant process can take advantage
‘checkmate’ or a ‘stalemate.’ We don’t high of quantitative easing wears off, the of. We for instance are always implicitly
see any great scenarios that can come same script plays out. What I’m saying is long vol/long dispersion. But we can
out of this massive deleveraging cycle. that at some point you’re going to have choose to be long correlation/short cor-
We’re in the camp of this being a great an episode of QE perceived not as a relation by tweaking our ratio bets on
stagnation/deflationary bust or secular license to melt up, but as sheer despera- idiosyncratic versus common factor risk.
bear market. tion on part of the Fed.
Q: I think you just lost me.
Q: What are your big concerns? It Q: How are these views translated into A: It’s very difficult for fundamental man-
sounds like this goes beyond Greece your strategy exactly? How does that agers to even measure their idiosyncratic
and European sovereign debt? mechanism work? versus common factor levels, much less
A: That’s right. All of the above plus of A: As I mentioned we’re more interested take advantage of that.
course the domestic issues: your fiscal
cliff, the $46 trillion of unfunded liabilities,
trying to solve the debt overhang with
more debt and the possibility of a disor-
Age: 40
derly default or disorderly decline in one
of the major reserve currencies. At the College/University/Grad School(s): Oxford, Vassar, Carnegie Mellon, Wharton
end of the day, we believe that enough Professional Background: MLIM, ran proprietary stat arb portfolios at RBC
cans have been kicked down enough
roads in enough countries that some- and Deutsche Bank AG, the latter under Boaz Weinstein.
thing’s got to give at some point soon. Mentors: Boaz Weinstein; Bob Doll, vice chairman of BlackRock.
Q: Will this be a big event or more like Charitable Work: Ti Kay Haiti (www.tikayhaiti.org)
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