Because the concept of qubit is somewhat newfangled and foreign, we have included this section as a way to address some of the basic concerns that an investor may pose to qubit.
Choose a topic on the left to see related questions
"We don't believe your GYfi framework makes money."
Hopefully this concern is alleviated by the GYfi Factor Performance tool. However, we do understand that this is a backtest and past
performance does not equal future performance.
For this reason, we laid out all the logic of each factor to show that the reads we generate are not arbitrary; they are thoughtful,
robust signals driven by economic relationships.
"We think the framework is too complicated."
The primary complexity of GYfi comes from the mixing together of the factors; each factor on its own is
An investor who is uncomfortable with the complexities of how the factors work
together has the option to exclude any or all of these factors from his or her portfolio
"We think your models are optimized to artificially inflate the results."
This statement is similar to the contention that the GYfi framework does not make money. As we stated
before, the factors of GYfi were built with economic logic, not with a backtest.
In addition, these models
have been live in production in our GAA Fund for several years with strong results.
"We don't understand how the 4 unique factors work together. They are not additive effects."
Our explanations of each factor have explained the economic phenomena that define Growth, Yield, Fear
and Inflation. The phenomena of each factor are distinct, and this fact is reflected in the performance of
the models that represent these factors.
The following table shows the correlation between the daily returns of each model:
GYfi Factor Return Correlations
"We don't trust your models because of their performance in 2018."
As we have stated already, the GYfi models are heavily researched, robust signals and are part of our GAA
Fund. 2018 has been a difficult for RQSI, like it has been for the entire CTA industry.
qubit’s “GYfi FreeReign” strategy, that generated a 1.8 Sharpe from 1999 to 2017, has lost about 100 basis points thus far in
2018. While this performance is far from ideal, it is actually better than most competing CTA’s.
"We don't use futures strategies."
The possibility of leverage that futures trading allows is a scary proposition for some investors. But the
choice to apply leverage is just that: a choice. qubit allows an investor to decline using leverage.
Furthermore, trading futures comes along with many benefits over cash positions:
Transparency: Futures prices are determined competitively, and futures positions are marked to
market daily. There are no “dark pools” of liquidity like those one finds in equity markets. There are
no massive interpolation schemes that one finds in most bond markets. As a result, the returns you
see are real and have not been smoothed.
Liquidity: The increased liquidity in futures markets allows the GYfi to realize their full effect. Without
this liquidity, it would not be possible to act on the reads in a timely manner.
For more details on the benefits of futures, see Burghardt’s “Managed Futures for Institutional Investors”
"We don’t believe the return stream does anything to enhance our current portfolio."
If qubit’s return stream is already replicated by part of your existing portfolio, qubit can still provide value to
you. The existing piece of your portfolio that is currently fulfilling the same role as qubit would likely does
not offer any customizability. If at some point, this return stream deviates from its expected outcome, your
only course of action will be to liquidate.
With qubit, however, the continued adaptability will allow you to
alter your portfolio appropriately.
"We are concerned that the software could break or not be maintained."
RQSI has decades of experience managing secure software systems. qubit maintains multiple redundant
data sources, multiple redundant data checks, and several backup systems.
These systems and data structures are the same ones that have allowed RQSI to safely run its GAA Fund,
which has been running without interruption since 2011, and TradePipe, which previously traded over 5%
of the daily volume of the New York Stock Exchange.
rqsi as a firm
"We don’t make allocations to outside managers."
qubit does not have to be implemented as an outside manager allocation. An investor can use the qubit tool
to allocate his or her portfolio the same way he currently manages his stock and bond portfolio,
incorporating whatever level of GYfi participation he or she sees fit.
All of this can be done on an integrated
basis as a managed account: managed by the client or with the support of RQSI.
"Your firm is too small for us to work with."
We may be small in terms of AUM but we have decades of experience managing a wide range of alternative
strategies. It’s very easy to insert a custodial bank or an administrator into your managed account
structure for the safety and protection of your assets. You can manage the assets with your internal team,
and RQSI is prepared to assist at as deep a level as is necessary.
We have managed large institutional assets
in the past and understand the reporting/compliance rigors of institutional asset management.
In addition, the lead principal of our firm is the head of the investment committee for a large state pension
system and is keenly aware of the needs of a large institution.