Quantum Capital Value Equity
investment strategy
The main goal of the strategy
Is to outperform the US stock market in the long run. The reflection of this market is assumed to be the SPY * index fund, since an alternative option for an investor is to purchase shares of this fund.

Over the past 13 years, US stocks have returned an average of 8.8% per year - before taxes on dividends. The Quantum Capital Value Equity Strategy backtest showed a result of 13.3% per year over the same period.

Stock market portfolio of large American companies
backtest
S&P 500
* SPDR® S&P 500® ETF Trust, which track the performance of SPXT index
Investor memorandum
Base currency
USD
Recommended investment period
from 5 year
Minimum entry threshold
100 000
Estimated return
13.3%
Management fee
1-1.5%
Success fee
15%
Investor profile
Quantum Capital Value Equity Strategy is well suited for investors who:
  • Want to own shares in outstanding companies
  • Want higher capital gains
  • Are ready for significant fluctuations in the value of their portfolio
  • Want to have very liquid assets
Return on invested capital from year to year
Table of monthly changes in portfolio value
Strategy performance
JANUARY 2007 - DECEMBER 2019
Accumulated total return for the period
407%
Average annual return
13.3%
Portfolio volatility
23%
Strategy's Sharpe Ratio
0.54
HYG Fund Sharpe Ratio
0.42
Share of months with positive returns
64%
Maximum portfolio drawdown
-56%
Considering the goal of the strategy is to overtake the US stock market at a comparable level of risk, portfolio instruments should generally be similar in type. The SPY Index Fund consists entirely of shares in major US companies.
  • The main strategy instruments are stocks of American companies. The SPY fund consists of these shares, but only of the largest companies. To outperform the market, QC also has the ability to acquire shares in smaller companies.
  • The secondary strategy instruments are stocks of companies from other countries. QC is looking for investment opportunities everywhere and often international companies are cheaper than American.
  • Additional strategy instruments are bonds, notes, performed stocks and currencies. These include bonds, notes, preferred stocks and currencies. These types of assets are acceptable for purchase when we see a significant opportunity to earn money or intend to protect the portfolio from any expected risks.
  • Derivatives may be used to hedge risks.
  • All of the above tools can be purchased both directly and through ETF, ETN, ETC and structural products.
Portfolio Target Structure
Significant deviations from the target structure are allowed and expected.
70%
Stocks
of American companies
30%
Shares
of companies from other countries
Investment approach
The basic idea of investing is owning a business, not speculation. This strategy is interested exclusively in long-term investment. Among the universe of companies, those that pass through very strict filters are selected:
  • Portfolio managers have understanding, and more importantly interest in the industry in which the company operates;
  • The company has a clear and sustainable competitive advantage;
  • Over the years, the company has been increasing sales, profits and cash flows;
  • Very competent and honest top management with a history of successful management.

A very small number of organizations pass through all of the filters above. Having selected the company, QC then proceeds to its analysis and evaluation. In the process of reviewing the business, we take into account not only financial statements, company presentations and analytics of large banks, but also take into account other, independent sources. QC analysts read reviews of company products, employee reviews on Glassdoor, trends on Google and Twitter, reports and presentations of competitors. To acquire a stake in a business, QC portfolio managers need a deep and comprehensive understanding of the company.

This level of confidence in the analysis allows you to invest a significant share of assets in one company - 5-15% of assets under management. To maintain ongoing expertise in the business, the portfolio will be distributed over approximately 10 stocks, which is a compromise between depth of analysis and diversification. In case some funds are not allocated, QC acquires ETFs and entrusts diversification to the market.

Risks Management
  • The main risks for the strategy are market and concentration risks. We also take into account currency and liquidity risks.
  • Market risk - is the vulnerability of the instruments to reduction in the price. This risk arises as a reflection of other vulnerabilities - financial, operational, currency, political and others. QC intends to reduce the effect of this risk by buying companies at a discount to the estimated value.
  • Concentration risk - portfolio's vulnerability to the results of one company. If the investor’s portfolio has only one instrument, then it completely depends on the return of this security. Many instruments compensate each other's movements and reduce the risk of concentration.
  • Currency risk - the likelihood that changes in exchange rates will lead to losses. However, it arises only when investing in non-dollar instruments. QC intends to acquire such securities only after a thorough macroeconomic analysis to minimize currency risk.
  • Liquidity risk - the degree of difficulty in selling instruments. The higher this risk, the more difficult it is to sell securities in a short time and without a significant price reduction. This risk is controlled by the choice of more traded instruments, with a larger market capitalisation.
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