Can you quickly review your career experience?#
Of course. I started in the industry in 2003, learning fundamental analysis in a brokerage stock trading team. At the end of 2005, with the implementation of the split share structure reform, I was transferred to the derivatives department and entered the warrants field until the end of 2008 when that business concluded. After that, I took maternity leave and returned to work in May 2009, starting my journey in quantitative strategy research and investment, particularly focusing on narrow quantitative hedging strategies from 2009 to 2016, developing many alpha-seeking strategies within a team with strong strategy development capabilities.
How did you transition from a single strategy to building a competitive portfolio, and how did this process influence your later career direction?#
During the actual investment process, I found that the performance of strategies was unpredictable, and integrating a bunch of strategies into a competitive portfolio was a challenge. Therefore, I designed a standard process for evaluating the cost-effectiveness of strategies and portfolio methods, which became a prototype for analyzing the entire market fund after 2017. The continuity of this evaluation standard from starting strategy research in 2009 to the growth cycle in 2015 was strong and eventually developed into my current core system - Opportunity Plus product.
Does the core principle mentioned include all details?
The core principle part is basic financial engineering knowledge, but the richness of underlying factors and the differences in detail handling are significant. For example, in factor research, even with the same model, different data processing methods and detail differences can lead to vastly different results. We invest a lot of effort in deep data processing, such as researching and selecting index compilation methods to ensure the compilation of more reasonable and continuous value and growth indices.
What are the principles when selecting investment assets? Do you consider both public and private offerings?#
Our investment asset pool includes both public and private offerings, with no specific restrictions. We select based on comprehensive cost-effectiveness, covering both public and private products, as the public market has good liquidity, high information transparency, and relatively low pricing, making it a good tool-type investment target.
What is your understanding of the concept of "virtual and real," and why did you choose to start a business in the FOF track?
I believe the "virtual and real" nature of assets is not important; the key lies in their organizational form and pricing mechanism. In 2016, when changes in industry policies affected my original work, I chose to start a business and found that the asset management field lacked high-quality asset allocation services and fund analysis services, which provided me with entrepreneurial opportunities and competitive advantages, thus choosing the relatively niche but promising FOF track.
If the underlying is a fund, does it have more variables and levels than stocks?#
Yes, when the underlying is a fund, its variables and levels are richer. This is because there are various organizational forms within the fund, such as investing in a single target, combinations, strategies, etc., and the fund itself has different investment ideas, risk levels, whether it includes derivatives, costs, liquidity, and various contractual terms. The combinations of these dimensions can create many new dimensions, although they are essentially still complex and difficult to control.
For fund investors, how should they view the role of managers in investments? How should investors prioritize considerations when choosing fund managers?
Fund investors should recognize that managers are a particularly uncontrollable variable. As fund investors, in addition to understanding the investment philosophy of fund managers, they should learn to become a FOF (fund of funds) fund manager, understanding asset allocation, risk control, and various investment strategies from a macro perspective, rather than simply imitating the specific operations of individual investors. Investors should first focus on changes in the assets themselves, the economic environment, and allocation ideas, then build corresponding portfolios based on client needs, and finally choose suitable fund managers. In the selection process, it is essential to fully understand and evaluate the rotation patterns of different assets and the investment directions under the macroeconomic background.
In actual investments, can individual investors execute investment philosophies like professional investors?
Individual investors often encounter difficulties in executing investment philosophies due to a lack of professional team support, limited access to information, and insufficient decision-making capabilities. For example, even if they understand the investment philosophy, they may not achieve similar operational effects as professional investors due to a lack of strong backend systems and database support.
What are the differences between institutional investment needs and individual investors? What specific expectations do institutional investors have for investment portfolios?#
Institutional investment needs differ from individuals in terms of risk preferences and investment constraints. Institutions typically have strict bottom-line requirements, such as drawdown, volatility limits, and prohibited investment areas; while individual investors may have irrational expectations for returns. However, regarding the range of returns and risks, institutions have relatively clear acceptable ranges, while individuals may misunderstand due to information asymmetry. A case from a leading trust company shows that they hope the new portfolio can exceed the yield of non-standard assets (e.g., 8.5%) while controlling volatility to not exceed 5%. Through a multi-asset diversification investment strategy, they ultimately achieved annualized returns comparable to GDP growth while controlling maximum drawdown at a low level.
What are the main difficulties for individual investors when facing complex investment products?#
The main difficulty for individual investors lies not in understanding complex investment strategies or return expectations, but in accepting the overall complexity of products, including volatility, the trade-off between risk and return, and the long-term nature of investment goals. Many people are accustomed to simple and intuitive investment products and find it difficult to understand and accept investment philosophies and strategies that go beyond classic curves.
In the investment field, how do you view the occurrence of phase-specific high returns in strategies? What are investors' expectations for annualized volatility and returns in the market?
I believe that when a strategy suddenly shows unprecedented large-scale high returns, it is a dangerous signal for me, as it may indicate that the strategy has deviated from the original volatility range that the asset or strategy should have. In actual communication with clients, most people view volatility as a negative phenomenon, but the acceptable level of volatility actually depends on the risk tolerance of the funds. Some funds can tolerate high volatility, but such situations are relatively rare. According to early statistics, the generally expected annualized volatility range for investors is between 3% and 6%, while the expected annualized return is between 8% and 10%. However, there are actually no asset classes in the market that meet these range requirements, except for a few special cases. Additionally, some strategies, such as quantitative strategies, can achieve high returns in certain phases, but due to their small capacity, they hold limited value for large institutions.
What are the reasons for the poor performance of the A-share market?#
The poor performance of the A-share market is not due to domestic companies being inferior to foreign ones, but rather the distribution of asset risk and return within the entire financial system. When the underlying risk-free return rate is too high, everyone tends to invest conservatively, leading to a deterioration in the supply-demand relationship of stocks, creating a negative feedback loop that causes stock volatility to rise and return rates to decline.
What is the impact of the exit of non-standard investments on the stock market?
The reduction of non-standard investments does not directly prompt funds to flow into the stock market; rather, while financing decreases, the quality of non-standard assets deteriorates, and rigid repayment is broken, leading ordinary investors' risk preferences to shrink drastically, with savings and insurance becoming safe choices for funds instead of entering the stock market.
How should ordinary investors understand and allocate assets to achieve reasonable returns?
Ordinary investors should understand the relative position and cost-effectiveness of various assets from the perspective of the entire financial system, rather than viewing stocks as a single market statically. A reasonable return target may be the midpoint or average of GDP growth and CPI growth, as everyone's risk preferences differ, and while holding stocks long-term may approach this level, the volatility is high, making it difficult for many to endure.
How do you view dividend investment and its choice between growth investment?#
Dividend investment is a basic and stable choice for some investors, especially during significant market fluctuations, as it can provide relatively stable returns. However, for some investors, the significant gap when dividends underperform the market can be intolerable. The existence of funds and FOFs (funds of funds) is to address this issue, reducing volatility through diversified investments, allowing ordinary investors to access more complex investment strategies and achieve returns close to GDP growth.
What role does product design play in investment management?
Product design is crucial in the entire investment management process; just as genes determine an individual's fate, the contract design of a product is a vital "gene" for investors. Managers need to pay attention to liquidity, valuation methods, fee calculations, risk control indicators, diversification indicators, and the specific execution of investment philosophies when designing products, ensuring that every detail in the contract text does not adversely affect the investment manager's decision-making during the investment process.
In investment, how to understand and achieve a god's-eye view? What does a neutral macro perspective specifically mean?#
The god's-eye view in investment is a neutral position, not knowing everything, but looking at the macro economy from the perspective of national and social interests, rather than analyzing it solely from the perspective of capital market risk premiums. For example, since 2019, some rural and town operating income growth rates have exceeded GDP growth rates, which is an observation of economic performance from the overall national interest perspective. A neutral macro perspective means first understanding the current development goals of the macro economy and social goals, rather than simply inferring macroeconomic conditions from investment results. Moreover, the macro economy does not serve investments but rather serves national and social interests.
Are there leading indicators in the macro economy? How do you view the current issue of leading indicators in the economy?
From a quantitative analysis perspective, there are currently almost no leading indicators at the capital market level, only coincident and lagging indicators. Past leading indicators, such as cement start rates in the real estate cycle, have gradually become ineffective in recent years due to changes in the main drivers of the macro economy, making it very difficult to find leading indicators for the current stage. So far, we have not found macroeconomic indicators that lead the capital market, only those that are coincident. However, macroeconomic data has a lag, and when used, one must consider the timing of future data acquisition.
Why is macroeconomic analysis still important for investment decisions?#
Although it is impossible to predict the future accurately, understanding the current stage of the macro economy and its changes is crucial for selecting managers who can adapt to the new cycle. Macroeconomic analysis helps investors identify changes in the times and find investment strategies and managers that adapt to different stages.
How to handle important issues in investment, such as market rotation and black swan events?
Market rotation, style shifts, and points of risk concentration (such as black swan events) are key focuses for daily investment. As a fund manager or large F (possibly referring to large asset management institutions), one should perceive and take preventive measures against risks in advance, striving for appropriate intervention during periods of excessive market excitement or local risk accumulation to achieve macro judgments and effective rotation strategies.
Can you give an example of how the outbreak of macro risks was predicted? Is overcrowding a necessary condition for the outbreak of macro risks?#
Before the Spring Festival in 2021, we successfully predicted the collapse of the Moutai asset group, making large-scale adjustments before the festival, reducing the overweight Moutai assets to underweight. Additionally, the collapse of small-cap stocks at the beginning of this year was also a macro-level risk event; although it did not cause a market-wide crash, its impact on market weights also followed the decline, though it did not spread into systemic risk. Yes, overcrowding is indeed a necessary condition for risk outbreaks, but not a sufficient one. It is usually accompanied by some quantitative and qualitative indicators, industry observations, etc., and triggers risks when accumulated to a certain extent. For example, while the overcrowding indicator does not guarantee that risks will occur, its appearance will trigger alerts.
How do you respond when the overcrowding indicator appears?#
When the overcrowding indicator rises to a yellow alert, we closely monitor changes in market sentiment. I assess market sentiment by observing the behavior of people within the industry (i.e., informants) and adjust the risk of the investment portfolio accordingly. For instance, during the 2014 quantitative hedging black swan event, based on observations of overcrowding, we took early measures to reduce positions to avoid losses.
In the investment process, how to balance the relationship between evaluating products and evaluating people?
I first focus on the product because product data does not lie, while human behavior may introduce uncertainty. When there is sufficient quantitative analysis support, communicating with managers will be more efficient to avoid being misled by subjective information or influenced by the emotional changes of the other party.
Is it possible to fit a stationary curve through technical means and understand the information behind it?
It is possible to fit a stationary curve through technical means as much as possible and obtain some information from it, but directly dealing with managers still involves costs and unpredictability. When communication is necessary, we rely on extensive quantitative analysis as a foundation to ask more targeted questions and understand the essence of the product.
When facing a quantitative manager, how do they handle situations where growth in scale leads to insufficient high-frequency trading capacity?#
The manager may tell you that they have calculated capacity, and even if the scale grows now, it is still far from saturation. However, this statement is vague; it may actually refer to when the scale rises from 2 billion to 5 billion, the alpha and Sharpe ratio may have already halved, and they may stop fundraising and no longer expand after reaching a certain scale.
Why are quantitative managers unwilling to elaborate on specific strategy details?#
This is because quantitative managers do not want to expose their core competitiveness and technical details, which often have fuzzy boundaries, and they do not wish to be easily replicated by peers.
Does an excellent fund manager depend on a specific investment strategy or background? How do quantitative fund managers view subjective long-only fund managers?
Yes, successful fund managers often depend on who they are. For example, there are cases where individuals who previously did not work in the industry perform very well; this "incremental information" is more valuable to them. Quantitative fund managers greatly admire subjective long-only fund managers because they can process vast amounts of information through human brains and make rational decisions, but this is an anti-human task. Although from the perspective of prioritizing products over people, the stability and quality of excess returns of subjective long-only fund managers often do not meet expected requirements, if they encounter fund managers with unique investment ideas, innovative philosophies, and the ability to bring incremental information, they will be highly valued.
What characteristics must subjective long-only fund managers possess to be recognized? What standards or considerations are there for finding and screening excellent subjective long-only fund managers?
Recognized subjective long-only fund managers must first demonstrate a certain level of quality in excess returns in their past performance; secondly, they must continuously learn and improve, adapting and optimizing strategies in the face of market changes; finally, some excellent fund managers can continuously expand their excess return boundaries as the scale of asset management grows, and they possess strong risk control capabilities, maintaining stability during expansion and evolution. Screening criteria include: historical performance meeting expectations, sustained excess returns, and evidence of learning and improvement; also paying attention to whether their boundaries are expanding and their risk control capabilities. Additionally, while there are many, there are not many subjective long-only fund managers who reach a certain level of recognition. In the search process, data analysis tools will be used to narrow the scope, but mainly rely on continuous observation and evaluation by hand.
What recent changes or trends are there at the macro level?#
Recent changes at the macro level mainly include two points: first, the "engine" has changed, meaning real estate is no longer the sole economic driving force, shifting towards technological development, high-end manufacturing, and improving the consumption level of the entire population; second, demographic structure changes, which will directly impact consumption structure and bring revolutionary changes to the financial industry, especially in the transformation of the pension industry and service model innovation.
As an asset management company, what do you believe is the fundamental value of products? How do you view the impact of demographic structure changes on the future of the financial industry?#
The fundamental value of products lies not only in investment success but also in being able to serve the investors behind the products well, benefiting them, and ensuring that the entire society benefits during the service process. Changes in demographic structure have a two-way impact on consumption structure and the development path of the financial industry; they not only change consumption trends but also shape the development direction of financial products.
How do you understand the changes in the country's global position and the status of the renminbi and their impact on investments?
When understanding changes in global status and the status of the renminbi, it is essential to consider the overall cost-effectiveness, structure of financial products, and global asset allocation perspectives, grasping the credit, liquidity, and potential opportunities and risks that the renminbi may bring.
At this current point, how do you view the importance of macro variables?#
The most important macro variables at present are those that are changing and have a direct impact on investments; we need to identify and focus on these core variables and respond accordingly.
Is there a correlation between long-term trends and short-term investment decisions?
There is a certain correlation and logical connection between long-term trends and short-term investment decisions; over a 1 to 3-year dimension, these trends may impact asset selection.
What is your view on inflation and its role in investment decisions?
Although it is not the current focus of research, inflation can affect commodity prices and resource prices under specific circumstances (such as the fragmentation of global integration), thereby impacting stock and commodity investments, becoming part of macro allocation considerations.
What are the difficulties of commodity investment compared to stock investment? What is the role of large F (possibly referring to investment strategies or managers) in commodity investment?#
Commodity investment is more complex than stock investment because it does not have directly comparable asset fund products, and the triggering factors vary among different commodities. It is necessary to find professional managers who excel in specific targets and strategies and assess their decision-making capabilities and ability to respond to unexpected risks. Large F will formulate tendencies at the macro level and seek corresponding managers while evaluating their professionalism and decision-making basis, ensuring that costs and returns match and strictly controlling investment permissions, maintaining neutrality and rigor in evaluations.
How do investment managers utilize cycle theory for decision-making? How do you view the effectiveness of the monetary credit cycle and its importance as an investment guiding philosophy?#
Investment managers integrate conclusions from different cycles into an overall conclusion through weighting, judging the current state and signals of short, medium, long, and ultra-long cycles like a voting machine, and attempt to find more reliable investment strategies within these signals. However, accurately judging the duration and amplitude of each cycle is challenging, and each round of cyclical changes varies, making precise predictions difficult. While some believe that monetary credit cycle theory is effective and successfully applied, others argue that it is more of a rhetoric or guiding philosophy, and actual investment behavior may not fully adhere to this cycle theory. Although the government has a wealth of data, whether it can effectively respond to economic cycles remains uncertain; it cannot be simply assumed that the government can grasp economic cycles without following cyclical laws.
What is the relationship between the unpredictability of cycle theory and government decision-making?#
Cycles themselves are unpredictable, and the government cannot grasp economic cycles as precisely as individual investors. Policies are more about responding to and compressing adverse cycles and enhancing effective cycles, but the efficiency of the government in successfully doing this varies. There is a paradox between cycle theory and government decision-making; policies are more like footnotes to cycles rather than forces that reverse them.
In different cyclical stages, does the ranking of major asset allocations still hold?
Even under the guidance of large cycles, medium and small cycles still exhibit rotation effects, and asset performance will differ within different cyclical segments, even in high-frequency trading. For both quantitative traders and fund managers, it is necessary to qualitatively analyze the current recession, recovery, and overheating phases and adjust major asset allocations accordingly to achieve a blurred combination management.
What economic stage are we currently in?#
The current market is in a monetary expansion phase, transitioning from a tightening state, specifically moving out of deflation and towards monetary expansion, but has not yet entered the credit expansion phase. During this stage, attention should be paid to investment opportunities such as rising resource prices and selecting suitable major asset allocations based on macroeconomic transformations.
Historically, in similar economic tightening states, have the rankings of different major asset classes (such as bonds, stocks, commodities) remained stable? Historically, in similar tightening states, the rankings of bonds, stocks, and commodities have been relatively stable, but the amplitude and duration of each cycle vary, and the credit environment may experience widespread collapse. For example, before and after the 2008 financial crisis, bond assets were no longer the best allocation due to increased credit risk, while not all investors could profit in the early stages of a bull market in the stock market.
Does the stock market exhibit cyclicality, and how do you measure the true cost-effectiveness of stock investments?#
The stock market also exhibits cyclicality, but the main lines change continuously, and due to characteristics such as rapid market expansion and high turnover rates, the performance of indices often does not synchronize with the actual investment experience of investors. Therefore, one should not simply use index fluctuations to measure the investment returns of stock assets but should focus on the growth of investor wealth rather than net value growth.
What is the value of large F (macro managers) and small F (specific asset or strategy managers)?
The value of small F lies in focusing on a specific asset or strategy and achieving extreme specialization; large F must comprehensively study various small Fs to form a team that can respond to various market environments. For investors, large F can ensure that the assets held are in a safe state and achieve long-term stable investment returns.
In the macroeconomic stage, if stocks are the most advantageous asset class, how can one find and implement this leverage in actual investments?
Once it is determined that stocks are the optimal asset, attention should be paid to the return gap between advantageous and weakest assets during past stock upswings, and clear differentiation trends should also be sought in fluctuating and declining markets. Investments should be guided by large cycles; even in non-bull markets, one should be wary of collapse risks caused by local overheating and prepare in advance to reduce volatility and maintain relative balance.
What specific investment forms are available when investing in technology stocks?#
There are mainly five forms of investing in technology stocks:
- First, actively managed funds, such as a certain technology fund, with no constraints on the investment scope;
- Second, themed funds with certain constraints, investing in specific industries but with no clear weight limits;
- Third, funds focused on technology leaders, investing only in leading companies within the technology industry (smart beta);
- Fourth, conventional index funds, purchasing stocks of related listed companies according to the definitions set by the Securities Regulatory Commission and fixed weights;
- Fifth, individual selection, directly purchasing and holding a specific technology stock.
As a large fund manager, how do you balance industry growth, alpha returns, and risk control when deciding to invest in an industry?#
When an industry is in a high growth phase, one should look for fund managers who can provide substantial alpha, assessing their performance in researching technology stocks and obtaining excess returns. If such fund managers cannot be found, consider allocating to index funds with a high industry ratio. For example, choose enhanced technology funds to achieve goals that exceed technology stocks.
How should investment decisions be made in industries that are not easy to generate excess returns?
Certain industries inherently do not easily produce excess returns, which is closely related to the fundamentals of the industry. In these industries, risks can be reduced through diversified investments or stock selection rather than blindly pursuing concentrated investments in a single industry. Additionally, macro and micro-level decisions need to complement each other; they cannot be viewed in isolation, and the overall decision-making system must maintain comprehensiveness and dynamic adjustment capabilities.
What is the ratio of algorithmic decision-making to human decision-making in investment decisions?#
At the micro level, algorithmic decision-making has a higher proportion; at the macro level, algorithms are more used for error correction and avoiding path dependence, assisting the decision-making process. The company adopts a collective decision-making mechanism, similar to a voting system, allowing data to speak, but in cases where quantifiable analysis is not possible, humans make judgments. For example, in significant events like election predictions, model results are referenced while combining human analysis to make final decisions.
When forming a team, what are the two approaches you mentioned?#
One approach is to build a team based on racial diversity, selecting two players from each race, valuing the wisdom of Asians, the explosiveness of Blacks, and certain qualities of Whites. The other approach is to construct a team with diverse abilities, not limited to the race of players, but focusing on the diversity of various abilities or strategies, giving the choice to strategists to select players based on strategic needs.
Do you involve country allocation and cross-border assets in asset allocation?
We do indeed allocate cross-border assets, conducting research and design within the range of selectable assets, but due to factors such as proficiency and control, managing domestic assets is more comfortable. For cross-border assets, while we also pay attention to foreign variables, the focus remains primarily on domestic major assets such as commodities and resources, which are often globally priced.
In investment decisions, how do you measure the feasibility and cost-effectiveness of each matter?#
This is a hallmark of professionalism, requiring a correct assessment of the relationship between the cost of each investment (including the funds expended) and the expected returns. This necessitates a deep understanding of market difficulties and the feasibility of each stage, using various indicators and decisions to minimize errors, ensuring the rationality and effectiveness of investment strategies.
How to respond to the challenges brought by scale in the investment strategies of fund managers? For active fund managers, how do you view the relationship between their management scale and investment performance?#
Scale can be both an enemy and not for fund managers, depending on various factors. For quantitative strategies, excessive scale may lead to decreased efficiency; for subjectively managed fund managers, excessive scale increases management difficulty and pressure, potentially leading to a decline in excess returns. However, there are exceptions, as a few large funds have achieved economies of scale through strategy diversity, resulting in more stable performance. The shelf life of active fund managers is relatively short; as the scale of funds grows, they may face a decrease in excess returns or even turn negative. Therefore, when selecting active fund managers, it is essential to consider their current state, learning ability, adaptability to market changes, and experience in coping with cyclical fluctuations, rather than merely focusing on their scale. It is also emphasized that when recommending fund managers or assets, the specific context and expectations should be combined, rather than making blanket statements.
What growth stages should an excellent fund manager undergo?#
The growth of an excellent fund manager can be divided into four stages. The first stage is beginning to recognize the essence of the market and being sensitive to some variables, daring to draw conclusions based on market changes rather than sticking to previously successful investment strategies. The second stage is understanding multi-strategy management thinking, accepting the effectiveness of various investment strategies at different stages, and learning to integrate them into a whole for mutual benefit. The third stage is cultivating self-evolution and iteration capabilities, possessing the ability to build systems and promote system progress, evolving like AI. The fourth stage is that regardless of whether managing small F, large F, or family assets, one must possess this capability for self-evolution and iteration on a large scale.
Do you think we should adopt a bull market mindset or a bear market mindset currently?#
Based on some current indicators, such as the yield curve of government bonds, the renminbi exchange rate, and the changes in relative returns of dividend stocks, I believe the conditions for entering a bull market mindset are already present. These indicators show that funds will flow into assets with more reasonable risk premiums, and the introduction of policies is often the trigger for market changes rather than the main cause.
What is your view on the renminbi exchange rate issue?#
The renminbi exchange rate will not solely serve asset prices; it will also comprehensively consider trade, geopolitical factors, and more. When the macro economy can accommodate more liquidity and the benefits outweigh the drawbacks, the renminbi exchange rate will perform stably. In the current stage, while there may be periodic fluctuations, the overall factors favoring benefits outweigh drawbacks.
Is there a correlation between the rankings of public fund managers and their subsequent sustained capabilities?#
Yes, there is a certain relationship between the rankings of public fund managers and their subsequent sustained capabilities. Public funds open for subscription and redemption daily, and this liquidity pressure may lead fund managers to pursue short-term performance to cope with redemption pressures. In contrast, private funds have lower openness, providing fund managers with more investment space, thus their rankings are relatively more stable, but this also means private funds may bear higher risks.
In qualitative terms, under what circumstances would a fund manager face a veto?
A veto usually occurs when a fund manager has serious errors or ethical issues, such as falsifying records or conflicts of interest. Additionally, if a fund manager or their team shows disrespectful behavior towards clients, such as unilaterally raising prices or terminating services during the cooperation period, it will also be seen as a professional ethics issue and face a veto. In actual investment research, we also conduct comprehensive evaluations of fund manager teams through qualitative analysis; if potential risks or non-compliance with investment principles are discovered, we will decisively exclude them.
In investment, if a fund manager has concealed information about performance, is this considered a negative behavior?#
Yes, this selective presentation of information is quite negative in my view, as investors do not receive a comprehensive and truthful situation.
When investors learn that a fund manager has previously experienced market pitfalls and is unwilling to objectively analyze or attribute risks, how should investors view this issue?#
In this case, investors should be concerned that the fund manager may make the same mistake again next time. Even if they do not lie or do anything wrong, this attitude of covering up problems is worrisome.
Is there a type of investment risk or complex operation that is difficult to detect, such as leveraging or aggressive operations, leading to potential risks being hard to discover?
Such risks do exist; due to information asymmetry and non-transparency, these potential risks are often difficult for investors to detect, requiring industry connections and deep insights to obtain this non-public information.
How do you choose investment strategies and avoid risks?#
I tend to avoid small probability risks and the potential consequences of dark sides, pursuing relatively conservative and safe investment strategies. We will use both quantitative and qualitative methods to eliminate fund products that do not meet our standards, including those with niche strategies or poor performance.
How to help individual investors form reasonable investment expectations and needs?
Individual investors need to set reasonable expectations based on their financial situation, risk tolerance, and long-term goals. For instance, whether they are pursuing asset preservation and appreciation or seeking a form of entertainment and leisure. At the same time, investors should pay attention to professional information sources, understand the risk-return characteristics and volatility of various assets, and formulate comprehensive investment goals based on their actual situation.
Is there an effective method or standard for ordinary investors to judge whether the investment manager they entrusted is professional?
This is a complex issue, and there is currently no consensus in the industry. However, seeking excess returns based on precise risk labels, focusing on the assets themselves rather than a single fund manager, is a relatively advanced thought. By constructing an objective and accurate asset identification database, investors can identify the risk-return characteristics of different strategies, enabling them to make more informed investment decisions.
In the investment field, if a product or investment is not within the conventional track, can it be considered a genius-level performance?
Yes, if an investment or product is not within the standard investment system, it may appear outstanding due to not being in a comparable track. For example, if the enhanced CSI 300 and enhanced CSI 100 are ranked as index enhancements, this is unreasonable. We believe that factors do not lie; if a product belongs to a certain track, its performance distribution should align with the expected distribution of the corresponding factors.
How do investment managers handle and treat the effectiveness of indicators during strong cyclical market style transitions, such as the switch between large and small caps or value and growth styles?#
We have been tracking these cyclical indicators but remain skeptical about their reliability. These indicators may seem effective in the short term, but in the long run, they may suffer from overfitting issues, finding a parameter that seems reasonable at every stage but is not practically operable or sustainable in the long term. As investment managers, we need to be wary of the lack of long-term effectiveness and ensure that decision-making cycles match target cycles.
Is the success of investment managers closely related to their client base?#
The success of investment managers derives half or even more of their competitiveness from the quality of their client base rather than their own abilities. Excellent clients can provide investment managers with longer investment cycles, allowing them to correct mistakes. However, in reality, many cyclical patterns often fail due to market imperfections and uncertainties.
How do you view the formation and disintegration of mainstream narratives, such as the zero-sum index or global diversified asset allocation phenomena?
These mainstream narratives are often summaries of phenomena at a certain stage; they may end prematurely or continue, for example, some so-called successful strategies may quickly decline after being summarized. As professional investors, we have the responsibility to discover and capture these changes while recognizing that every investment methodology has its value and can be useful for investment decisions at certain stages.
What is the purpose of writing the "Large F Series"?#
The purpose of writing the "Large F Series" is not merely to establish industry influence but to systematically organize and summarize investment philosophies and strategies, providing opportunities for practice and improvement for myself and the team, while also serving as a reference for communication with clients and friends. Additionally, by organizing data and empirical research, we seek to explore the soil for alpha returns in different fields and reveal that areas with opaque information and high cognitive thresholds often contain more alpha opportunities.