Research

A professional and rigorous research team. The research scope covers domestic and overseas markets.

By interpreting market hot spots and analyzing investment strategies, it helps you grasp investment trends,

look ahead to the global layout, and provides you with asset allocation recommendations.

Understanding the Volatility Risk Premium
Post Date: 2021-12-29

The volatility risk premium (VRP) represents the compensation that investors earn for providing protection against unexpected market volatility. This paper first describes the VRP and the reasons why it may exist. We then explore its historical performance with a simple option-selling strategy and conclude by discussing approaches for including it in a portfolio. What's Inside? The volatility risk premium (VRP) represents the reward for bearing an asset’s risk (e.g., equity downside risk). Such protection in financial instruments is best represented by option contracts. The insurance risk premium in options reflects investors’ risk aversion and their tendency to overestimate the probability of significant losses. We believe an investor can systematically exploit these risk preferences and behavioral biases through an option-selling strategy and we show how it may benefit investor portfolios over the long run. Investors interested in adding the VRP to their portfolios can do so in a variety of ways. The strategy can be a stand-alone portfolio, one of multiple sleeves of a multi-alternative portfolio, part of a buy-write strategy, or part of a volatility-enhanced equity strategy. Conclusion The VRP is the compensation that investors earn for providing protection against market losses. In doing so, they are underwriting insurance — primarily option contracts — and as with all insurance, the underwriter seeks a risk premium. We show that the VRP has historically tended to deliver strong risk-adjusted returns and that it may provide useful diversification within an investor’s portfolio. Interested investors could consider adding the strategy alongside traditional long-only strategies or use it in conjunction with other non-traditional return sources.

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Pythagoras teams with Singapore outfit on bitcoin fund
Post Date: 2021-12-29

Crypto hedge fund Pythagoras Investment Management has teamed up with MainNet Capital to launch a directional trading bitcoin CTA fund from Singapore. MainNet initially seeded the fund, which aims to enhance returns from bitcoin. The new fund started trading on Friday, run by Rubing Duan, the CTO of Pythagoras Investment and now a PM at MainNet. The long-biased MainNet Pythagoras Alternative Asset (MPAA) fund trades CME-listed futures contracts taking long positions in bitcoin futures and hedging with shorts. It is the second hedge fund structured as a Singapore VCC from the MainNet spearheaded by founder and chairman Elon Huang. MPAA achieves absolute return regardless of market conditions through short-term trading in order to manage risk, according to Huang. Through CME futures, the fund gains directional exposure to the price of bitcoin but on reduced downside volatility, he added. The strategy produces better risk-adjusted returns than just buying bitcoin spot or holding the asset. “The primary strategy is trend following, both long and short, using conventional momentum trading techniques that have worked in managed futures and traditional markets but this time applied to the CME Bitcoin Futures,” the firm said. To diversify and reduce risk, the fund can also invest in ETH futures contracts which now trade at the CME since early this year. Besides starting a financial technology start-up, he has been engaged in research and development work on big data and quantitative financial technologies in the last 12 years and has written more than 40 papers published in international journals and conferences and also holds more than four patents on new inventions. Huang, the founder of MainNet, previously established his career in wealth management in Singapore local banks prior to establishing his own vehicle four years ago. Huang said the fund offers a transparent and fully regulated product since it only trades futures contracts instead of the crypto asset itself. A three-year backtest of the algo-driven strategy from 2018 to March 2021 suggested a staggering 2,818% gain versus only 346% for bitcoin in the same period, according to Huang. MainNet began as a venture capital outfit but created an umbrella vehicle for its internally-seeded hedge funds under Singapore’s VCC regime. The group early this year launched a macro volatility fund also under Singapore’s VCC regime. Its Mountview Futures Fund, a volatility risk premium fund, started with around $2m and has grown to around $20m most recently. The fund has delivered a net return of around 1% every month since March. The strategy focuses on the volatility of options and leverages the regression of volatility to build an options portfolio to go long or short, which provides a relatively stable return. The fund’s macro overlay identifies the imbalance and mismatch of financial asset prices. Jet Li, the portfolio manager, previously worked at several Wall Street firms, running billion-dollar portfolios prior to joining MainNet.

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MainNet Capital™ Monthly House view (Nov 2022)
Post Date: 2022-11-28
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2023 Crypto market review and investment advice
Post Date: 2023-02-07

In 2023, the development of blockchain technology is expected to focus on the following areas:

Scalability: Developers are working on increasing the speed and efficiency of blockchain networks to handle more transactions per second.

Interoperability: There is a growing need for different blockchain networks to communicate and work together seamlessly.

Decentralized finance (DeFi): DeFi applications and protocols continue to grow in popularity and investment, and their development is likely to accelerate in 2023.

Privacy: With privacy concerns becoming more pressing, developers are exploring ways to increase the privacy and security of blockchain transactions.

Regulation: Governments around the world are starting to regulate blockchain and cryptocurrency, and this is likely to continue in 2023.

Adoption: The adoption of blockchain technology by businesses and organizations is expected to continue to grow in 2023, particularly in industries such as supply chain management and digital identity.

 

As of 2023, the cryptocurrency market has seen continued growth and maturity, with a growing number of institutional investors entering the space. Bitcoin, the largest and most well-known cryptocurrency, remains the dominant player in the market, with a market capitalization of over $1 trillion.

Ethereum, the second largest cryptocurrency by market cap, has also seen significant growth, driven in part by its role as a platform for decentralized finance (DeFi) applications. DeFi, which uses blockchain technology to provide financial services without intermediaries, has emerged as one of the hottest trends in the crypto space.

Other cryptocurrencies, such as Binance Coin (BNB), Cardano (ADA), and Dogecoin (DOGE), have also seen notable gains and increased adoption.

Overall, the cryptocurrency market has become more regulated, with governments around the world taking steps to establish clear rules for the sector. This has added to the growing legitimacy of cryptocurrencies, attracting more institutional investors to the market.

However, the crypto market remains highly volatile, and it's important to carefully consider the risks involved before investing.

Investment strategy for 2023 will vary based on individual goals, risk tolerance, and market conditions. Here are a few general considerations for an investment strategy in 2023:

Diversification: Diversification is a key aspect of any investment strategy, and this is especially true in 2023, as market conditions may change rapidly. Consider spreading your investments across different asset classes, such as stocks, bonds, real estate, and commodities, to reduce risk.

Long-term perspective: While short-term market fluctuations can be tempting to trade on, taking a long-term perspective is often a more successful strategy. Consider investing in assets that are likely to perform well over the long-term, rather than trying to time the market.

Consider alternative investments: Alternative investments, such as real estate, private equity, or hedge funds, may offer higher returns than traditional investments, but they also come with higher risks. Consider carefully before investing in these assets and seek professional advice if necessary.

Monitor market conditions: The economic and political landscape can change rapidly, and this can have a significant impact on investment performance. Keep a close eye on market conditions and be prepared to adjust your investment strategy as needed.

Professional advice: If you are unsure about the best investment strategy for you in 2023, consider seeking professional financial advice. A financial advisor can help you develop a customized investment strategy based on your individual needs and goals.

 

Binance is a leading cryptocurrency exchange that was founded in 2017. In 2023, it's expected to continue to play a major role in the cryptocurrency market. Here are a few things that could shape Binance's future in 2023:

Expansion: Binance has already expanded into several markets around the world and it is likely to continue to do so in 2023, potentially entering new regions and increasing its user base.

DeFi and NFTs: Decentralized finance (DeFi) and non-fungible tokens (NFTs) are two of the hottest trends in the cryptocurrency market, and Binance is likely to play a role in these areas in 2023, whether through its exchange, Binance DEX, or other products and services.

Competition: Binance is one of the largest cryptocurrency exchanges in the world, but it faces significant competition from other exchanges, both established and new. In 2023, Binance will need to continue to innovate and differentiate itself in order to remain competitive.

Regulation: Cryptocurrency exchanges like Binance are subject to increasing regulatory scrutiny around the world, and this trend is likely to continue in 2023. Binance will need to navigate this regulatory landscape in order to maintain its operations and continue to grow.

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Feb 2023 Monthly Letter
Post Date: 2023-02-07
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