Reasons for adopting a market neutral strategy
The investment strategy we adopt is called the Japanese equity long-short strategy. A stable investment profit can be achieved regardless of market trends by using both the buying of stocks that are expected to rise in stock prices (long position) and the selling of stocks that are expected to fall in stock prices (short position). The investment strategy you are aiming for.
The stock long-short strategy is the most common stock investment hedge fund strategy, but it seems that there are major flaws in the long-short strategy in the world. That is, although it is called a long/short fund, the proportion of short positions is actually small and it is biased toward long positions. According to our own market analysis, hedge funds with Japanese equity long/short strategy may have an average long/short ratio of around 5:1. If you can accurately predict future market quotes, that method may be fine. You can make a big profit by increasing buying when the market price rises and increasing sales when the market price falls. However, in reality, since the stereotype that “shares will go up” precedes, it is possible to make a high profit when the market is rising, but when the market is falling, there are few short positions, so there is no risk hedging and there is a loss. Will be released. The results of our market analysis show that it is extremely difficult to predict a downtrend and increase short positions appropriately.
We have adopted a “market neutral strategy” that always matches long and short positions with the same amount of risk, based on the assumption that “no one knows what will happen to the market price in the future”. doing. We do not bet on the market price itself. We will make an investment focusing only on the strength and weakness of individual stocks based on bottom-up research.
In an extreme way, a long-short strategy that is largely biased toward long positions is a simple “long-only strategy”, with the same risk and return. Is that what investors really expect from long-short strategies? We don’t think so. When the market environment is good, good conditions mask the real risks of investment. We want to be an investment advisory company that can demonstrate its value when market prices are tough. We believe that it is our existence value to continue to make investment decisions without being swayed by the market environment and relying on the temperature sensation obtained from bottom-up research.