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Quantitative Investing Brings Great Gains in Asian Markets, Fund Says

Posted: 08 Feb 2012

There are “big gains” to be made from applying systematic, research-based quantitative investment methodologies to the maturing emerging Asian markets, according to institutional investment manager QIC.

“Emerging markets have been the focus of plenty of attention in the past few years; however, for a host of reasons investing in them has been a hit-and-miss affair,” says Michiel Swaak, managing director of QIC Quantitative Management, which manages the Asia Pacific Market Neutral Fund. “But more recently the situation has changed. Better, more consistent accounting standards mean the quality of data coming out of Asian markets has improved dramatically, providing the raw material required to establish meaningful models and identify opportunities that are most likely to deliver consistent alpha for investors.”

QIC launched its quant-focused QIC Asia Pacific Market Neutral Fund in July 2009. In 2010-11, QIC reported in its most recent annual report, the fund returned “around” 20% alpha on a gross basis. It is domiciled in Ireland and operated out of Asia Pacific, and has an AUD share class providing AUD-hedged returns. The fund outperformed the MSCI Asia Pacific ex-Japan index by approximately 18% in the 12 months to December 2011, Swaak says.

QIC points to the size of the investible universe of 3,000 stocks across 13 markets, and also notes that few fund managers are using quantitative techniques to emerging Asian markets.

“We firmly believe that quant players have the jump on the market for a number of reasons. In our case, in addition to our extensive research and analysis capability, our team has many years of dedicated Asian experience,” Swaak says. “We’ve used that to develop a systematic trading process, which captures the relevant data even as the markets continue to evolve, then feeds it into our flexible portfolio management infrastructure.”

To achieve market neutrality in the fund, the quantitative team applies “comprehensive risk controls to all aspects of the portfolio, including net, gross, country, single-stock, currency, beta and risk factor exposures,” QIC said in its report. Applying those techniques to the Asian market means that there are “great gains” to be made from the region.

“We believe our approach forms the blueprint for successful alpha investing in Asia, and we’re pleased to be able to offer an Australian dollar-denominated investment to Australian clients while we still retain the first-mover advantage,” Swaak says.

QIC has AU$60.6 billion in funds under management as at Dec. 31, 2011.

(RA)

If you have any comments about this story or news tips, contact Christopher Gohlke in New York at cgohlke@globalcustodian.com or Janet Du Chenne in London at jduchenne@globalcustodian.com.