Navigating Low-Risk Investments with Market Neutral Strategies

At its core, a market neutral strategy is a sophisticated hedge fund approach, often referred to as an alpha strategy. It's designed to secure relative excess returns by neutralizing volatility risk in the stock market. Consequently, the fund's net value shows minimal correlation with the broader market index's performance, ensuring stability even in turbulent times.

The Strategy's Core Principle:

Alpha Return = Long Equity Portfolio – Beta

The strategy involves purchasing a diverse portfolio of stocks (long positions) while simultaneously employing short positions through derivatives like options or stock index futures. This approach aims to hedge against Beta risk, focusing on absolute returns (Alpha) without being swayed by market risks (Beta).

Why Market Neutral Strategies Stand Out:

1. Low Correlation with Market Indices: By using derivatives to hedge systematic risks, market-neutral strategies typically exhibit minimal correlation with market indices. Whether in bullish or bearish markets, the strategy's performance remains comparatively stable.

2. Targeting Absolute Returns: The goal is to achieve excess returns regardless of market conditions—bullish or bearish. If the chosen stocks outperform and cover hedging costs, the strategy yields a consistent absolute return.

3. Reduced Risk and Volatility: By hedging out market risk, this strategy is significantly less volatile than pure long or short strategies.

Market Neutral in Various Market Conditions:

1. High Volatility Markets: Market neutral strategies excel in high volatility environments, with low volatility and minimal retracements, outshining other strategies due to their low correlation with the market.

2. Bear Markets: In declining markets, market-neutral strategies effectively protect against downside risks and showcase notable excess returns.

The Importance to Investors:

• Stable Returns in Volatile Macroeconomic Environments: In today's world, where economic uncertainty and market volatility are prevalent, the appeal of market-neutral strategies to investors is significant. These strategies offer a haven of stability, providing consistent returns irrespective of macroeconomic fluctuations. This is especially crucial in times of economic downturns or market instability, where traditional investment approaches may falter.

• Diversification and Risk Management:
  Market-neutral strategies also serve as a powerful tool for portfolio diversification. By being less correlated with traditional market movements, they offer a layer of risk management, protecting investor portfolios against market-wide downturns. 

• Enhanced Investment Opportunities:
  These strategies unlock new investment opportunities by capitalizing on market inefficiencies and alpha-generation potential, independent of market trends. This allows investors to benefit from market movements in both directions, making the most of every market scenario.

What MS Capital Can Offer to Investors?

MS Capital is at the forefront of private fund management, distinguished by its innovative application of artificial intelligence technology and rigorous investment management practices. It consist of a strong founding team with vast experience in strategy modelling, machine learning, trading in financial market, and features following core competencies:

• Diverse Data Processing: MS Capital employs an extensive array of data sources, including volume, price, sentiment, and industry-specific information, to craft informed and strategic investment decisions. 

• Advanced Factor Engineering: Our trading logic and the complexity of parameters considered is at the forefront of the industry, integrating genetic algorithms and deep learning. This allows MS Capital to cover a broad spectrum of market frequencies, from rapid intra-day movements to long-term trends.

• Supported by World-Class Talents: consists of experienced quantitative researchers and world-class deep-learning scientists and engineers from countries such as U.S., Singapore, China, and U.K, many of which are  PhDs and winners of Kaggle competitions worldwide.

In the Chinese market alone, the world’s second largest market for quantitative trading, MS Capital provides investors with market-neutral and other alpha-generating strategies that already powers 10 billion RMB in daily trading volume, creating over 15+ million RMB of wealth for investors on a daily basis. MS Capital’s strategies reduces the macro risk of individual markets, while serving investors with the benefit of lower market risk and sustainable return. This impressive performance underpins its commitment of providing stable returns for investors while relentlessly innovating in a rapidly evolving landscape of AI/ML trading.

MS Capital is now extending its strategies and products to multiple other international markets, including the United States, Japan, India, Thailand, and more.

To learn more about MS Capital, please reach out to one of our client managers.