Xu Shunan, founder of Inno Assets.

In 2006, he graduated from Tsinghua University and went to MIT to study for a postgraduate degree.

In 2009, he joined the top international arbitrage hedge fund IMC.

In 2014, Inno Assets was established.

In 2021, Inno's assets will exceed 10 billion yuan.

This seems to be a professional profile of a typical "sea turtle" quantification. Communication with it is like reading a research report or clean code. The words are precise, there are no redundant verbal expressions, and even adjectives are rarely used, but for quantification The judgment of the situation, the understanding of people in the quantification, or the meaning of the word "inno" itself, has another kind of temperature.

01 "People are behind the strategy"

In 2006, after graduating from Tsinghua University, Xu Shunan received a full scholarship and went to the Massachusetts Institute of Technology (MIT) to study for a postgraduate degree. Three years later, he accepted a job offer from IMC, a top international arbitrage hedge fund, and joined the company's Hong Kong office, responsible for arbitrage transactions in Asia-Pacific markets such as Hong Kong, Singapore, South Korea, and Taiwan.

In the fourth quarter of 2014, Inno was born. The original office was a simple dwelling; the original staff consisted of only two people.

With the strength of Haofeng, Inno's growth is highly similar to the time growth trajectory of domestic quantitative investment. From 100 billion at the end of 2018 to more than 1 trillion in 2021, 10 times in 3 years, Inno has also grown from more than 1 billion at the end of 2018 to more than 15 billion in 2021, and the personnel structure has also ushered in a substantial expansion. , forming a perfect company structure and investment research team system.

From establishment to development to expansion to promotion of tens of billions of private equity, from the United States and Hong Kong to A-shares, Xu Shunan has a clear thinking on the core competitiveness of quantitative hedge funds: all investment strategies have an effective cycle, and they will gradually decay and fail. . The core competency of quantitative hedge funds will never change: effective investment strategies. Behind the strategy are people, and the core competitiveness is actually the investment and research team.

It is precisely such an understanding that Xu Shunan believes that for quantitative hedge funds, it is absolutely impossible to rely solely on external recruitment of mature fund managers. Because the quantitative strategy itself is secretive, it is impossible to form an effective team solely by relying on external recruitment. There is a strong uncertainty about the details, characteristics and risks of the fund manager's strategy, and these aspects cannot rely on a cold set of Effective evaluation of the digital system . Therefore, in order to become bigger and stronger, quantitative institutions must have an effective training system.

The research and development of quantitative strategies requires strong mathematical statistics and programming skills, which are highly consistent with the background of science and engineering and research methods in famous universities. Therefore, the recruitment of top quantitative institutions at home and abroad has strong consistency characteristics. A school of science and engineering. Even so, it is still a small probability event for a good newcomer to grow into a good fund manager. "There is no easy money in the market, otherwise everyone will make money. Where is the value of our investment and research team training system? I think an excellent training system can improve the probability of new talents becoming talents." Xu Shunan In the experience of the company, an effective training system can fully tap the potential of personnel, and the probability of success can be increased several times. At the same time, even if some personnel have not grown into independent fund managers, they can still reflect the corresponding contribution and value by doing their own work in the strategy team.

Xu Shunan was born in arbitrage strategy, and Inno’s earliest strategy was developed with him as the core. Slowly, strategy research and development became more and more dependent on the team. Xu Shunan still spends more than half of his time on investment and research to understand the research progress of all strategy lines, but he is less and less involved in the details of strategy research and development. "Strategic research and development ultimately depends on a mature team and system. It is necessary to fully stimulate and tap the potential of each member. The stronger the team and the more perfect the system, the greater the value of the company. It is impossible for one person to defeat an excellent team. At the same time, Xu Shunan has also undertaken more management work. "This is a flat industry, there won't be a lot of relationships between superiors and subordinates, and it speaks directly based on performance. This is also an industry where Kochi talents gather, and the company's incentive system design is very important. Normal talent flow does not Terrible, the company's management framework and incentives have to keep the most suitable and best people possible."

02 A new era of quantification of trillions

In the fourth quarter of 2021, the quantitative market ushered in a huge wave, and there was a substantial common retracement. Xu Shunan believes that with the scale of private equity quantitative funds reaching more than one trillion, it is inevitable that there will be mutual influence. Any investment model, as long as the scale reaches a certain volume, will have mutual influence and amplify the level of volatility. As quantitative investment enters the trillion-dollar era, it has come to such a point. This effect can be clearly observed in terms of liquidity exposure and changes in the basis of stock index futures.

In Xu Shunan's judgment, in the last decade, due to the small overall scale of quantification and the large fluctuations in market inefficiency, from the perspective of investment effect, the domestic market is undoubtedly a golden period for quantitative investment. But slowly, as the volume of quantitative investment becomes larger and larger, and the Chinese market becomes more and more efficient, the investment effect of quantitative investment will gradually enter the silver period, and excess returns will inevitably decay, while fluctuations and withdrawals will increase. The essential reason for this phenomenon is not the failure of the strategy, but the fact that the Chinese market has become more and more effective. Of course, this trend will not only happen in quantitative investment. In fact, as China's economic growth gradually slows down and the market becomes more efficient, the return-risk characteristics of various assets will inevitably decline. Therefore, even in the silver age of quantitative investment, it still has strong competitiveness.

In fact, even if quantitative investment exceeded one trillion yuan last year, it still only accounts for 20%+ of the entire secondary market asset management industry, which is a huge gap with mature markets. Therefore, in the next 10-20 years, in the silver era of quantitative investment, it is foreseeable that quantitative investment will still achieve great development, gain more recognition from investors, and bring greater value to Chinese investors. The new era of trillion quantification is just a new starting point.

The impossible triangle between size and revenue and volatility applies to an industry as a whole, as well as to a single company. "There is actually no fixed number for the capacity of a strategy. However, the performance of a strategy is inversely related to its scale, which is a common law that all investment models follow. For quantitative strategies, the attenuation within a certain range is not yet obvious. However, after the breakthrough, there may be a more serious attenuation. There is not necessarily a clear dividing line in the middle. As an investment institution, it is necessary to grasp the relationship between the characteristics of the strategy and the management scale.” Xu Shunan’s goal is to On the premise of maintaining competitive performance in the market, rationally develop management scale to avoid performance damage caused by explosive scale expansion.

He pointed out that after 20 or 30 years of development in the American industry, well-known brands have been formed. For example, when you buy Bridgewater's products, you know that as the largest hedge fund under management, it does not provide a significantly higher level of return risk than the market average. But investing in Bridgewater also means being more stable and reassuring. On the contrary, for new investment institutions, although it may bring high returns, it may also bring greater uncertainty. In the long run, investors will interact with investment institutions to grow.

In 2019, the pure neutral products of Inno sealed disks stemmed from this kind of restraint in development. "The purpose is to control the rhythm of our scale growth and at the same time give up capacity to more competitive strategies." Xu Shunan believes that the sealed disks It is definitely not a negative way to deal with it, but a choice that investment institutions will inevitably face. It’s just what kind of time to do it and what kind of mentality to do it in. That’s what you should really consider. This is for investors. responsible practice.

"Sometimes there are abnormal situations in the market. For example, when there is a period of extremely large ineffective fluctuations, investors will have the illusion that the strategic profit method can last for a long time." Xu Shunan said, but this is likely to be only a short-term effect of the market. For example, like the market in 2015, the profit of arbitrage strategy is 5 to 10 times higher than that of normal years, but obviously this situation is not sustainable. Even without the introduction of any policy, such extreme gains cannot be sustained for long. Therefore, the long-term nature of investment is something that institutions must grasp. "Even for professional practitioners, there may be over-confidence or over-pessimism in some aspects, which can only be gradually compensated by experience."

"The drawdown of the strategy is part of the characteristics of the strategy itself, and it is unavoidable in any investment model . For quantitative investment, all events are probabilistic events. The goal of quantitative investment is to obtain high-probability returns. From the perspective of quantitative investment, there is no deterministic return.” If there is a small probability event, it is necessary to do a good job in investor communication and communication, and convey the real concept to investors. Xu Shunan believes that the quantitative model is based on statistics. The more sample data, the more obvious the statistical significance. If the time period is relatively short, there will be relatively strong randomness. In fact, randomness cannot be avoided by any means. As the management scale becomes larger and larger, the trading frequency of strategies will be relatively low, and the accumulation of low-frequency strategy samples will take longer, which requires more mature investors and investment concepts.

03 "Because of commitment, we go all out"

The word "INNO" has two meanings: the Chinese name can be interpreted as "because of commitment, we will go all out", which is the company's eternal commitment to investors; the English name "INNO" is the abbreviation of Innovation, which means Innovation, and innovation is the foundation and soul of the survival of quantitative hedge funds. From the very beginning, Xu Shunan's goal was to build Inno Assets into a world-class hedge fund like "Renaissance".

In Xu Shunan's eyes, Inno's investment philosophy is as follows:

1. Believe in quantitative investment. Quantitative investing is investing based on mathematical statistics. The market cannot be absolutely efficient, and there are always invalid fluctuations. Such invalid fluctuations will show a certain statistical relationship and be captured by excellent statistical models. Therefore, the basis of quantitative investment is very solid, and it can even be said to be effective forever, because it is based on the crystallization of human wisdom for thousands of years—mathematical statistics.

2. Talent is the most important and core foundation of quantitative investment. Quantitative investment is like sailing against the current. Only by constantly attracting and cultivating excellent talents can we continue to make excellent strategies and maintain competitiveness in long-distance running. Therefore, for quantitative hedge funds, talent and talent training system are the most fundamental.

3. Quantitative investment can create value. Quantitative investment is not only profitable, but also has important economic and social value. In the long run, quantitative investment can reduce the level of ineffective volatility in the market and continuously improve the effectiveness of the market, which has been proven in the Chinese market. At the same time, quantitative investment belongs to the high-tech industry, which has spawned and developed a number of new technologies since its birth. Not to mention, quantitative investing itself is an important asset allocation method. These are the value of quantitative investment to the whole society.