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On July 17, a quantitative private equity giant Huanfang Quantitative published an article titled "Answers to Several Questions on Quantitative Investment", which caused a huge stir in the industry, with the company's official account alone being read 26,000 times. Huanfang Quantitative said that the claim that quantitative investment led to the decline of A-shares is a big misunderstanding.

Previously, the well-known economist Liu Jipeng had made many remarks against quantitative funds, saying, "First pull the index to 4,000 points and then release quantitative trading", "2.6 billion was sold in 57 seconds after the opening, even basic fairness is gone", "Don't let quantitative trading reap the leeks of patient capital", "Quantitative trading should be suspended, it is killing long-term funds and is incompatible with 99% of retail investors", etc.

Some people say that "quantitative chasing ups and downs increases market volatility", while Huanfang Quantitative believes that in fact, the market efficiency of A-shares is already relatively high, and it is difficult to make money by short-term chasing ups and downs. As a whole, quantitative investment suppresses market volatility in most cases, and in a few cases it increases market volatility. Quantitative participants can push the market to a new equilibrium position more quickly, reduce unnecessary shocks, and increase pricing efficiency. The overall quantitative strategy is convergent and rational, and plays a "damping" role on volatility.

A public quantitative fund manager told the China Times reporter that at presentRaised fundsAll of them are medium and low frequency transactions, and the trading mechanism does not support high frequency transactions. It can be seen that the "high frequency quantitative" mentioned by Liu Jipeng refers to private equity quantitative institutions.

On July 22, Liu Jipeng said in an interview with a reporter from the China Times that quantitative trading, as a form of short-term capital, poses a threat to market fairness, especially in the A-share market, where 95% of investors are retail investors who do not have the means to engage in high-frequency quantitative trading. Therefore, the existence of quantitative trading may exacerbate market unfairness.

He pointed out that quantitative trading accounts for a considerable amount of trading volume in the A-share market (about 40%), but this trading volume is an illusory prosperity because it does not truly reflect the market's long-term value investment trend.

Liu Jipeng refutes the claim that magic squares “damp” volatility

Liu Jipeng told the China Times reporter that in the development of China's capital market, we must respect China's national conditions and cannot blindly copy foreign experience. At the same time, he also believes that we should actively learn from international mature norms and experience, but we need to combine China's actual situation for localized innovation and application.

Liu Jipeng mentioned that capital finance itself has two sides. It can be an angel that promotes economic growth, but it can also become a devil that triggers crises in some cases. Therefore, it is necessary to maintain a cautious and rational attitude towards the supervision and use of capital finance and test its effectiveness through practice.

As for the issue of quantitative trading, Liu Jipeng pointed out that there are some problems with quantitative trading in the current Chinese capital market, such as causing unfair competition and exacerbating market volatility. He believes that these problems need to be taken seriously and resolved to ensure the fairness and stability of the market. At the same time, he also questioned the practice of some people simply attributing market volatility and market declines to quantitative trading.

Liu Jipeng believes that the active stock market does not only refer to the increase in trading volume, but more importantly, the rise of the market and the overall performance of the market. He stressed that in order to achieve the active stock market and the rise of the market, it is necessary to solve the problem of market fairness and protect the interests of the majority of investors. At the same time, he also opposed the practice proposed by some people to boost the market by restricting certain trading methods, believing that this approach may not fundamentally solve the problem.

Liu Jipeng reminded that when learning from international experience, we need to carefully consider its applicability and feasibility in the Chinese market. He believes that although there are many successful capital market experiences and practices in the world, they are not necessarily suitable for China's national conditions and market environment. Therefore, when learning from international experience, we need to conduct in-depth research and analysis in combination with China's actual situation.

Giant Huanfang Quantitative shouts across the air

According to data from Private Equity Ranking Network, as of July 19, the number of quantitative private equity managers with management scale exceeding 10 billion yuan has reached 30. As one of the 30 quantitative private equity firms in China with management scale exceeding 10 billion yuan, Huanfang Quantitative enjoys the reputation of "Northern Jiukun, Southern Huanfang" in the industry, and is also listed in the more widely circulated title of "Four Heavenly Kings" of quantitative funds.

Quantitative investment refers to the use of mathematics/statistics/artificial intelligence and other methods to replace manual decision-making and invest in the secondary market.

Huanfang Quantitative said in an article that some people now regard quantitative trading as the main reason for the market downturn, which is a big misunderstanding. Some people believe that "the market opens high and closes low, which is quantitative selling high and buying low; the market rises or falls, which is quantitative chasing up and selling down". As long as there are market fluctuations, even if there are divergent phenomena, they are interpreted as quantitative manipulation. It seems reasonable, but it does not stand up to scrutiny. The rise and fall of the stock market has its own rules. The fluctuation itself is the direction of the combined force formed by all market participants based on fundamental judgment. This direction cannot be dominated by a single institution or a single type of investor.

Huanfang Quantitative believes that at the trading level, it is generally believed that in most periods of time, the trading volume of quantitative investment institutions accounts for about 15% to 20% of the entire market. When the market is extremely depressed, this proportion may rise to 20% to 30% or even higher. The proportion of quantitative trading volume may be stable in the long term and will not increase indefinitely.

Huanfang Quantitative said that in terms of the domestic quantitative industry, the current mainstream strategies are index enhancement strategies, quantitative long strategies and neutral strategies based on multi-factor models. The stock side of these strategies has maintained highPositionOver the past few years, this huge and stable amount of funds has been the stable long-term capital of the A-share market. Quantitative investment institutions, like other A-share investors, strongly hope that the A-share market will rise in a long-term and healthy manner.

Is high-frequency quantitative analysis the culprit for the downturn in A-shares?

Is quantitative investment the same as high-frequency trading? Huanfang Quantitative said that high-frequency trading is a form of quantitative trading, but most quantitative trading is not high-frequency trading.

In response to this question, Wang Tieniu, director of the Ji'an Jinxin Fund Evaluation Center, explained his understanding of quantification to the reporter of China Times, emphasizing that quantification and high-frequency trading cannot be simply equated. He pointed out that whether it is fundamental analysis or technical analysis, as long as the investment decision is made through quantitative means, it can be included in the scope of quantification.

So, is high-frequency quantitative trading a savior or the culprit for the downturn in A-shares? Wang Tieniu said that from the perspective of high-frequency trading, there is a phenomenon that is particularly undesirable: taking advantage of market rules, such as frequentCancel Order, using transfer and financing and other means to make profits in a way that exceeds that of ordinary investors, this behavior is problematic. At the same time, he also said that quantitative investment should not be completely denied, because digitalization and artificial intelligence means to assist investment are the general trend, and this trend has been widely used in various industries at home and abroad, including financial centers such as Wall Street.

BoruiPrivate EquityWu Xuan, a fund manager of , told the reporter of China Times that for quantitative trading, the diversity of strategies is its most important feature, including but not limited to index enhancement, quantitative long positions, neutral hedging, long-short strategies, quantitative DMA, etc., and the market generally criticizes not all quantitative strategies and products. The more representative one is the index enhancement strategy, which does not pursue absolute returns, but pursues relative returns that exceed the benchmark index through factor construction and weight adjustment. However, it is undeniable that the risk of excessive trading concentration exposed by the collective collapse of DMA strategies at the beginning of the year caused many investors to suffer losses. Coupled with the long-short strategy centered on the securities lending mechanism and high-frequency quantitative trading, investors have strong dissatisfaction with certain A-share trading systems.

Wu Xuan believes that we should look at quantitative trading dialectically. We should not throw the baby out with the bathwater. It is not advisable to blindly believe that canceling quantitative trading can change the market trend. But we should not turn a blind eye to some quantitative trading that uses asymmetric trading mechanisms to obtain excess returns. We should avoid the phenomenon of unfair trading that continues to erode market confidence and thus have a negative impact on market operations.

Editor-in-charge: Shuai Kecong Editor-in-chief: Xia Shencha