Stocks are ingredients to an index as spices are to a meal
Returns from thematic robo-advice portfolios can be boosted by using quantitative screens, without increasing risk for investors, according to a new white paper by Quantifeed.
The leading provider of B2B digital wealth management solutions in Asia Pacific, Quantifeed, today released the paper Designing thematic indices with a quantitative factor. It outlines an improved methodology for global thematic index construction, which features in its portfolios for financial institutions servicing the mass affluent segment in the Asia Pacific region.
Gaudi Schneider, Quantifeed’s Senior Quantitative Strategist and author of the white paper, says there are two distinct approaches to building indices: thematic indices, based on investment themes; and factor indices, based on empirical research of past investment returns. While the former approach is based on a forward-looking growth story for a niche industry, the latter uses quantitative variables, such as volatility, yield, size and momentum.
“The thematic and factor approaches to building indices have their own individual advantages for digital wealth management services. However, at Quantifeed we believe that through a calculated combination of both, financial institutions can deliver a much better risk-adjusted performance,” says Mr. Schneider.
“Mass affluent consumers in Asia Pacific who are receiving wealth management online can truly benefit from a quantitative overlay to their portfolios.”
“Financial institutions, on the other hand, can also capture the opportunity of digital wealth management services not only by servicing this segment of clients remotely, but also by delivering to them an enhanced portfolio performance,” he added.
Mr. Schneider explains that one way of introducing a factor to a given thematic portfolio is to apply weights to securities based on a specific variable, for example, volatility, instead of the standard weights based on market capitalization.
“Low volatility stocks have been shown to outperform higher volatility stocks over extended periods of time,” he says. “Taking advantage of this phenomenon can be achieved by giving stocks with low volatility a greater weight in the portfolio. We call this inverse volatility weighted,” he explains.
To illustrate the effect that a factor can have on a thematic index, Quantifeed looked at a group of stocks of U.S. listed companies that are active in the design of robots and automation services. By applying the inverse volatility weighting (IVW) quantitative factor to this group of stocks, Quantifeed’s model outperformed the original index by 11 percentage points over a three-year period between February 2014 and February 2017. While the original version of the index declines by 4% during this period, the version with the quantitative overlay rose by 7% during the same period. (See table)
Table: Compared performance between Feb-2014 and Feb-2017
To enhance performance further, Quantifeed’s analysts applied an additional quantitative factor but into the stock selection process. The additional screen included the fundamental measurement of Return-on-Invested-Capital (ROIC), considered by the analysts as an appropriate criterion for the robotics industry, which usually requires large investments in research, factories or machinery.
The results of the ROIC inverse volatility weighted index showed this time a 11% return during the three-year period, leading to an outperformance of 15 percentage points over the original index. (See table)
In neither of these cases did the factorized portfolios gain in volatility versus the original index.
Quantifeed’s automated investment platform allows financial institutions to offer advisors and customers a digital wealth management experience under their own brand. Quantifeed’s software and financial models provide banks, brokers and wealth planners with a configurable solution to suit their wealth management objectives. Firms can reach hundreds of thousands of consumers quickly and economically. The platform hosts portfolios of stocks, funds and other asset classes across all major global markets. Investing solutions can be based on risk assessment, life goals and thematic ideas. Quantifeed offers a library of portfolios for asset allocation, thematic investments and other trading strategies.
The company was founded by former investment banking executives Alex Ypsilanti, CEO, and Ross Milward, CTO, in Hong Kong in 2013.
Quantifeed, a leading provider of digital wealth management solutions in Asia Pacific, today announced the appointment of Audrey Wong in the combined role of Chief Operating Officer and Chief Financial Officer, alongside several other key senior hires in Hong Kong and Australia. The Hong Kong based company is moving ahead with regional expansion after announcing successful completion of a US$4.5 million Series A round in July.
Audrey Wong brings strong financial and operational experience, coming from Bank of America Merrill Lynch, where she was COO of Asia Pacific Equities in Hong Kong. Her career spans more than 15 years in the investment banking sector, including roles as CFO and COO.
“I’m delighted to be joining a fast-growing FinTech company that has already established a strong reputation and track record in the region,” said Ms Wong. “As the company grows across Asia Pacific, I will be focusing on working with the management team to deliver on Quantifeed’s business strategy, and achieving growth in a sustainable way.”
Quantifeed’s technology is rapidly gaining traction among financial institutions who are looking to offer an enhanced online wealth management experience for their customers and advisors via robo-advice. The company’s highly scalable digital solution for financial institutions, has been designed to integrate with existing systems, reducing the time and cost of implementing new technology for corporate clients. The platform offers automated investing functions based on life goals, risk assessment and investment themes for consumers and wealth advisors.
Key appointments also include
Graeme Brant, based in Sydney, is Senior Executive for Strategic Partnerships and drives the company’s business in Australia. Graeme brings strong expertise in investment products and distribution to institutional, high net worth, and retail investors. Graeme’s career in financial services covers over 20 years, with senior posts at Merrill Lynch and Macquarie Bank;
Dominic Chan, based in Hong Kong, will be joining by year end as a Senior Executive for Strategic Partnerships responsible for distribution in North Asia. He has over 16 years of experience from leading financial institutions including Standard Chartered Bank and JP Morgan; and,
Chi-Leung Fung, based in Hong Kong, is Senior Developer of Operations. Chi-Leung, a former Director at Bank of America Merrill Lynch, brings expertise in platform engineering and technology in electronic trading and derivatives.
“These hires demonstrate the company’s commitment to helping wealth management businesses in Asia execute their strategy in a digital world,” said Alex Ypsilanti, CEO and co-founder of Quantifeed. “We are tremendously fortunate to have people of this caliber on the team. They will be instrumental in helping us grow and scale our business across Asia.”
Quantifeed’s automated investment platform allows financial institutions to offer advisors and customers a digital wealth management experience under their own brand. Quantifeed’s software and financial models provides banks, brokers and wealth planners with a configurable solution to suit their wealth management objectives. Firms can reach hundreds of thousands of consumers quickly and economically. The platform holds portfolios of stocks, funds and other asset classes across all major global markets. Investing solutions can be based on risk assessment, life goals and thematic ideas. Quantifeed offers a library of portfolios for asset allocation, thematic investments and other trading strategies.
The company was founded by former investment banking executives Alex Ypsilanti, CEO, and Ross Milward, CTO, in Hong Kong in 2013.
Quantifeed recently graduated from the OCBC Open Vault Fintech Accelerator programme, which took place between May and August in Singapore. Eight companies from across the globe were chosen from over two hundred applicants, with the purpose of helping entrepreneurs build promising Fintech companies.
The programme culminated in a Demo Day held at Capitol Theatre in Singapore on August 4th. John Robson, Quantifeed’s Chief Commercial Officer, presented to a 350+ audience, including distinguished guests such as OCBC Bank Group CEO Sam Tsien, and Deputy Managing Director of MAS Jacqueline Loh.
Provides wealth management software to Asian financial institutions; Plans to accelerate product development and expansion in Asia Pacific.
Quantifeed, a leader in digital wealth management solutions in Asia, has reached a significant milestone by closing US$4.5 million in a Series A financing round. Shanghai-based PGA Venture Partners led the investment. The funds will enable Quantifeed to accelerate expansion in key markets in the Asia Pacific region, including China.
“The battle in digital wealth management will be won by the institutions with the strongest distribution and the richest customer experience. We are working with some of the top institutions in Asia to build them a customer investment journey,” said Alex Ypsilanti, CEO and Co-founder of Quantifeed. “PGA Venture Partners has an incredible track record of building successful companies and we look forward to working with them on bringing our product to the Chinese market.”
Quantifeed’s clients have been using its platform to manage assets since early 2015. Quantifeed has integrated with three execution brokers to enable its clients to invest across major global markets.
“We believe Quantifeed’s digital investment solution is one of the most comprehensive in the industry, combining a robust financial technology platform, global investment themes, and a pipeline of innovative investment tools and applications,” said Mr. Peilung Li, Founder of PGA Venture Partners. “Quantifeed is well positioned to capture the next wave of private wealth’s growth in Asia and is ready to execute its strategy in China.”
Quantifeed’s automated investment platform allows banks, brokers and wealth planners to offer their customers a digital investing experience under their own brand. Quantifeed’s software and financial models provide institutions with a configurable solution to suit their wealth management objectives. This allows firms to reach hundreds of thousands of consumers quickly and economically. The online platform enables users to invest in portfolios of stocks, funds and other asset classes across all major global markets. Quantifeed offers a library of portfolios for asset allocation, thematic investments and other trading strategies.
The company was founded by former investment banking executives Alex Ypsilanti, CEO, and Ross Milward, CTO in Hong Kong in 2013.
About PGA Venture Partners
Shanghai-based PGA Venture Partners invests in early and growth stage companies around the world. Its early investments include companies in financial and education technology. The firm’s approach is to help portfolio companies navigate their entry into the Chinese market and create an ecosystem of complementary businesses.
To arrange an interview with the co-founders, Alex Ypsilanti, CEO, or Ross Milward, CTO, and for more information on Quantifeed, please contact Johanna Laajarinne: firstname.lastname@example.org.
Quantifeed is recognized among the top 20 innovative start-ups in Hong Kong by FinTechCity. The list features start-ups with the potential to become game-changers as well as high-growth enterprises with competitive staying power. It was included in FinTechCity’s FinTech50 2016 report. It is the second time the list has been released in the report and was published to coincide with FinTechCity’s Money 20/20 event taking place in Copenhagen.
“Between them, our panels looked at over 500 FinTech companies in India and Hong Kong.”
View the whole report here.
Quantifeed is a semi-finalist in the highly-competitive Innotribe Startup Challenge. Launched by SWIFT in 2011, the Innotribe Startup Challenge hand-picks the most impressive fintech startups globally and makes introductions to banks and VCs during four regional showcases. Quantifeed will showcase their product in front of an audience in Singapore on May 28th, which will ultimately vote for the top 5 companies of their choice at the end of each showcase. The 20 companies selected globally in total will automatically secure their place as finalists in the Innotribe Startup Challenge Grand Finale. This year the event will take place in Singapore on October 14 2015.
“We are thrilled that Quantifeed has been recognized as a leader in the burgeoning fintech industry by Innotribe,” said Alex Ypsilanti, CEO of Quantifeed. “We are also encouraged that companies like SWIFT are actively facilitating the development and growth of the exciting Fintech field.”
Over 500 industry experts, bank decision-makers, venture capitalists, and angel investors judged the companies applying to the Startup Challenge and helped select Quantifeed as one of the 60 semi-finalists entering the programme this year.
Out of a total of 92 applications, Quantifeed was fortunate to be the final winner (Diamond Award) for the Microsoft Stream of My Favourite Cloud Product (MFP) competition.
Quantifeed is now a member of the Cyberport Incubation Programme.
This highly-competitive programme, which only accepts one in five applicants, provides successful start-ups with financing, business development support and access to advanced facilities and resources. Quantifeed will receive financial assistance of HK$330,000 (US$ 42,000). The programme also provides access to business and alumni networks and peer support.
For more information, see the Quantifeed press release.
The British Business Angel Programme, organized by the British Chamber of Commerce and sponsored by Baker Tilly, shortlists Quantifeed to the 4 finalists presenting to angel investors at The Hong Kong Club.
This angel programme helps bring innovative startups and angel investors together.