Gaudi Schneider

Quantifeed, Asia’s leading provider of B2B digital wealth management solutions, has announced today the launch of a new model portfolio of the most valued brands in the world.

The Most Valuable Brands US strategy consists of a quantitative selection of US-listed companies with strong brands that consumers value most and with which they are most familiar.

To identify these brands, Quantifeed ranks companies by their brand value, defined as intellectual property, trademarks and icons. Given the relevance the strategy gives to brand value, the model portfolio has a higher representation of sectors that are highly visible to consumers, such as consumer staples and technology.

Household names such as Facebook, Amazon, Alphabet, AT&T, Toyota and Walmart are represented in the current portfolio.

“It is often said that a person should only own stocks of companies whose products they know and understand.  Investors may feel a strong connection to a portfolio when it contains familiar brands of products and services they know and use. This strategy can also work to the advantage of financial advisors who may be looking for straightforward ways to engage clients in investment discussions,” said Gaudi Schneider, Senior Quantitative Strategist at Quantifeed.

The Most Valuable Brands US strategy is up 16.8% year to date, outperforming the broad US stock market by 5.3%.

Graeme Brant, Senior Executive for Strategic Partnerships at Quantifeed, said, “The products and services provide by these companies are part of our daily lives, and they represent of the largest companies traded in the US.”

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Gaudi Schneider

Leading provider of B2B digital wealth management solutions Quantifeed has announced today the launch of its Belt and Road model portfolio. The portfolio aims to capture the growth opportunity of the multi-year Belt and Road Initiative (BRI) led by China to build a modern version of the ancient Silk Road.

The 21st century form of the Silk Road comprises land and maritime trade routes connecting China with Central Asia, South East Asia, Australia and New Zealand, the Middle East, Africa and Europe. This initiative involves the construction of ports, warehouses, and connections to overland transport in strategic locations, and the construction and upgrading of rail-networks. The overall infrastructure investment for the BRI is estimated to be as high as US$900 billion, of which only a fraction has been pledged so far.

Quantifeed’s model portfolio consists of a selection of Chinese companies that will directly benefit from the BRI. This includes large businesses in the areas of infrastructure development, transportation infrastructure construction, non-residential building construction, and renewable energy development and distribution.

In addition to their direct involvement in the BRI, the rules of the portfolio require its constituents to derive a significant part of their revenue from countries other than China, have a positive return on equity (ROE), a market capitalisation over CNY 500 million and daily liquidity of CNY 50 million.

Gaudi Schneider, Senior Quantitative Strategist at Quantifeed, said: “The Strategy provides access to Chinese companies that are at the heart of this multi-year initiative. Our systematic stock selection process identifies the companies that will benefit from the Belt and Road initiative and provide investors with exposure to the likely growth associated with this theme.”

Mr Schneider explained that the weight of the stocks considered in the portfolio is inversely proportional to their volatility (inverse volatility weighted), which often results in improved performance too. The index-composition and weighting is reviewed semi-annually.

Graeme Brant, Senior Executive for Strategic Partnerships at Quantifeed, said: “The creation of the Belt and Road model portfolio is a direct response to the needs of our clients and prospects who are looking to offer engaging investing thematic alternatives to their own clients”.

“In this case specifically, we are addressing our clients’ request to make available a portfolio designed to capture the growth opportunity of what’s possibly the biggest macroeconomic story of the century,” he added.

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Gaudi Schneider

Leading provider of B2B digital wealth management solutions in Asia Pacific, Quantifeed, yesterday launched a model portfolio to capture the opportunities of the growing global industry of self-driving cars.

Quantifeed’s model portfolio includes a selection of companies leading the development of self-driving cars, including technology providers and vehicle part suppliers.

“We’ve carefully selected companies who are currently benefiting from the new automotive technologies around the world or are expected to benefit from it in the near future”, said Quantifeed’s Senior Quantitative Analyst, Gaudi Schneider.

Current holdings in the initial portfolio include:

• Tesla (NASDAQ: TSLA), a U.S. based manufacturer whose market capitalisation overtook Ford and General Motors this year, despite its much lower production numbers.
• Alphabet (NASDAQ: GOOGL), which is currently developing its project Waymo, one of the most advanced and ambitious undertakings in the field of fully self-driving cars.
• Delphi (NYSE: DLPH), a U.K. based vehicle parts supplier, given its record growth in the segments used in Advanced Driver Assistance Systems (ADAS), connectivity (vehicle-to-vehicle or vehicle-to-infrastructure) and in-car-entertainment systems.
• Nvidia (NASDAQ: NVDA), a U.S. based manufacturer of high performance processors. Its products are used for gaming, self-driving car technology, artificial intelligence, visualisation and data-centres.

Spurred by Tesla’s initial success, incumbent car makers like Ford (NYSE: F) also invest greatly in the development of new systems for the development of hybrid or electric vehicles (EV). Hybrids and EVs are viewed as a necessity for self-driving cars, as their electric engine can more easily integrate with an electric device compared to combustion engines.

“While the relationship between incumbent carmakers, vehicle part manufacturers and new entrants from Silicon Valley is sometimes portrayed as a competition, we at Quantifeed view it as a symbiotic relationship,” said Quantifeed’s Senior Quantitative strategist Gaudi Schneider.

“The different industries in our model portfolio bring different skills to the table. The tech companies supply computing power, connectivity, integration, innovation and artificial intelligence that have found use in other domains and are now being transferred to the automotive industry.

“The carmakers are familiar with the industry-specific long planning and development cycles, which take several years, the management of a vast supply chain, and the high safety requirements,” he explained.

Graeme Brant, Quantifeed’s Senior Executive for Strategic Partnerships in Australia, said that wealth managers across the APAC region are looking for more engaging investment opportunities for their clients.

“A portfolio tracking the performance of companies involved in the emerging self-driving cars industry is valuable for advisors, not only because of the potential growth that represents for their clients’ portfolios, but also because it’s a sector that can bring significant diversification benefits”, he said.

“Similarly, at Quantifeed we have developed model portfolios for our clients with other modern global industries, like 3D printing, robotics and social media, all of which can benefit advisors to increase their engagement with customers,” he added.

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Gaudi Schneider

Returns from the17matic 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)

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.

A copy of the whitepaper can be found here: http://www.quantifeed.com/wp-content/uploads/2017/03/Quantifeed-White-Paper_14Mar17.pdf

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