Quant Suite FAQs Print E-mail

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Quant Suite is a comprehensive all-in-one set of software tools for hedge fund risk assessment and fund of fund portfolio construction. This section summarizes only common FAQs related to Quant Suite itself; for the details of the applied quantitative models and techniques please, visit Quant Knowledge base section or contact us to schedule a live demo for you.

What is the core risk assessment methodology applied?

Quant framework utilizes various hedge fund risk valuation tools and metrics including:

  • VaR derivatives (VaR, CVaR, MVaR and HVaR)
  • High moments, for example Omega and Kappa statistics
  • Style analysis integrated with the Trend Segmentation™ techniques
  • Distribution analysis

Quant statistics are calculated in two ways: based on historical return series and derived from a stochastic simulation.

Can Quant Suite forecast manager performance?

Though Quant Suite has never been intended to be used a forecasting tool, it shows positive results in exposing excessive hidden risk factors in advance and, as such, may help you in spotting hidden-risk hedge funds before it is too late. Contact us to get access to the Quant Case Study Library to see the examples of Quant performance predicting capabilities.

How can I select the best risk valuation product?

Well, you may find a broad range of competing software products and methodologies targeting the hedge fund investment sector. The key question is not even which one is the best, but which one is applicable for hedge funds as such. In brief, as soon as it incorporates the mean-variance framework (i.e. the standard deviation and mean return) its usability for a hedge fund assessment becomes nil. Most of the known commercial platforms come from either equity or fixed income instruments valuation and neglect the unique hedge fund risk management problems. Many applications attempt to apply traditional mutual fund valuation frameworks, which are hardly applicable to alternative instruments. Therefore, the question “which platform is the best” comes down to the answer “how it addresses and solves the unique hedge fund problems”.

What Value-at-Risk metrics are used?

While Quant Risk engine calculates a broad range of VaR-based measures, we recommend using the VaR metrics of the fitted distributions (the best fit). The range of supported VaR frameworks includes:

  • The parametric and historical VaR
  • The Modified VaR
  • The Conditional VaR
  • The Hybrid VaR
  • The empirical VaR of the best fit distribution
  • The empirical VaR for the simulated output (for the fund portfolio risk assessment)

What is the preferred stochastic simulation technique?

Quant Risk engine incorporates both the Monte Carlo and Latin Hypercube simulation techniques. The Latin Hypercube technique, forces the samples drawn to fit more closely with the input distribution, therefore, converging faster on the true statistics of the input data. Most case studies of hedge fund stochastic optimization demonstrate more accurate results, when applying the Latin Hypercube method.

How does the best fit distribution technique work?

Quant Risk engine integrates the best fit distribution routine, i.e. finding the closest approximation of the predefined distribution functions to the historical return series. The procedure of finding the best fit is seamless. After the data series is defined, the system automatically identifies the closest distribution approximation ranked on the base of Chi-Squared, Kolmogorov-Smirnov, or Anderson-Darling statistics. As the distribution is fitted, we can immediately measure the VaR or CvaR readings for the approximated curve and the empirical series.

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Can I customize the generated reports?

Yes. We provide all the reference names and functions to ensure an easy report customization.

What is a fund wallet?

A fund wallet is a temporary subset of funds from the fund universe (aka favorite funds). It is used to facilitate the portfolio composition process by providing the means of truncating the fund universe. After the initial fund screening, selected funds are placed into one of the defined wallets for a further analysis. You may create as many wallets as needed, move funds from one wallet to another, assign weights to individual funds and so on. Quant framework also offers Global wallets that may contain instruments from different vendor databases.

Can I analyze funds that are not included in the common data feeds?

Yes. To do this you just need to copy & paste fund returns series into one of the wallets according to the predefined format.

What are the portfolio objective functions of Quant Optimum?

The optimization engine of Quant Optimum provides two ways of setting an objective function: using a pre-defined one or creating a custom formula from the set of the given parameters. The pre-defined range includes the following multi variant objective functions:

  • VaR minimization (including MVaR and CVaR)
  • LPM minimization (Lower Partial Moments)
  • Omega maximization
  • Mean of returns maximization
  • Local correlation minimization
  • Maximum drawdown minimization
  • Semideviation minimization
  • The style factor optimization (enhancing portfolio neutrality or increasing factor dependency)
  • Skewness and kurtosis optimization (minimizing the distribution tails)

In fact, almost any of the applied indicators or risk metrics can be used as an objective function.

What are the predefined distributions used for the best fit?

The predefined distributions cover the broad range of known distribution functions including:

Beta General Pareto
BetaGeneral Geometric Pareto 2
Beta-Subjective Pearson V Pearson VI
Binomial Hypergeometric Gaussian
Chi-Square Inverse PERT
Cumulative IntUniform Poisson
Discrete Logistic Rayleigh
Discrete Uniform Log-Logistic
Student’s t Error Function Lognormal
Triangular Erlang Lognormal 2
Trigen Exponential Negative Binomial
Weibull Gamma Normal
Extreme Value Uniform

How can Quant Suite help me to find better funds?

The whole idea behind Quant framework is to ensure better risk/return profiles of constituent funds. First, it allows you to screen the entire hedge fund universe using the true risk valuation indicators. By incorporating these indicators Quant Suite stands apart from its peers that offer the conventional mean-variance approach, which is hardly applicable for hedge funds. Second, it provides tools for manager style analysis, the "real style" rather than a formal and useless self-defined fund category label. Knowing the major factors driving manager performance you may effectively build a more robust portfolio or rebalance it should the market conditions change. Third, the system includes sophisticated tools not only to compare managers' spot performance, but analyses it in dynamic. It helps you to find funds with degrading performance or stable ones. Fourth, Quant Suite includes a proprietary technique, called Trend Segmentation™. This technique allows valuating managers performance during various market conditions rather than over the entire reported period. Fifth, our new FlexiRank™ framework offers tools for constructing your own custom valuation metrics and ranking instruments accordingly.

Can you help me to interpret the obtained results?

Yes, by all means. We understand that using so complicated math models in practice could be a challenging experience. We also understand the importance of the timing factor for our clients. That is why we have established the Live Support desk that is capable of resolving a broad range of questions - from simple software problems to complex risk management and portfolio composition issues. If your question cannot be resolved by the Live Support team, it will be passed to our in-house experts.

How often are QS updates released

Application updates, which indlude bug fixes, are usually released every 4-6 weeks. Application upgrades, which include new features and components, are suslly released every 2 months. When you purchase a Quant Suite license, you are entitled to free product upgrades for a total license period.