China has now become the world’s second-largest economy. In this country, one of the standout companies is Mingshi.
Mingshi, a quantitative private fund management firm, aims to be the most trusted investment manager in China. Therefore, we conducted an interview with Mr. Steven Lee, Head of Japan of Mingshi, in order to have him share insights into the future outlook of the China asset management market and the vision that Mingshi is striving for.
Steven H. LEE
Director, Head of Japan
Steven joined Mingshi in 2020 to focus on business development for Mingshi’s offshore business in Japan and Korea. Steven has over 26 years of experience in working with institutional investors and strategic business partners in the US and in the APAC region. He has been based in Hong Kong since 2007 and has extensive experience with hedge funds, fund of funds, long only strategies and alternative investments.
He holds 4th degree black belt in Shidokan Karate from Japan and is passionate about teaching budo to the next generation. He is a graduate of Boston College and lives in Hong Kong with his wife and two children.
Steven is licensed with the Hong Kong Securities and Futures Commission (the “SFC”) for asset management and securities advisory services.
Could you please provide an overview of Mingshi?
Mingshi Investment Management (“Mingshi”) is a quantitative investment manager focused on research, risk management and alpha creation in China’s capital markets. “Mingshi” represents the combined global operations of Mingshi’s onshore and offshore businesses. Mingshi was founded in Shanghai, China in December 2010 by Professor Yu Yuan and Professor Robert Stambaugh and is one of the founding firms of China’s quantitative investment industry. Professor Yuan is a Chinese national who completed his post graduate studies in the US receiving his Ph.D. in Finance from The Wharton School of the University of Pennsylvania.
Professor Stambaugh is an acclaimed US academic currently serving as the Miller Anderson & Sherrerd Professor of Finance at Wharton. Mingshi specializes in quantitative investing in China-A Equities, with 129 full-time staff, 75 dedicated to investment strategy department. Headquartered in Shanghai, with offices in Hong Kong and New York.
The main goal of Mingshi is to provide the most advanced China investment solutions to Japanese and global investors.
What are the key attractions of Mingshi as a quantitative private fund management firm?
Mingshi is built on a foundation of academic rigor and market leading China-A research. We believe success in China’s capital markets is achievable with a quantitative investment process that combines fundamental financial theory with the latest in computer science and artificial intelligence.
Guided by our proprietary academic research – the pillar of Mingshi’s investment philosophy – we believe long-term, sustainable outperformance can be achieved by:
- Producing high quality, in-house research using asset pricing theories
- Utilizing in-house machine learning algorithms to solve the high dimensionality problem in factor combination
- Combining all the above in client portfolios governed by global best-in class risk management and execution
Mingshi is solely focused on capturing inefficiencies that stem from the unique market structure and investor composition in the China A-share market.
Key inefficiencies are exploited through Mingshi’s proprietary signal development and the non-linear combination of these signals via artificial intelligence algorithms. Mingshi continues to invest in improvements, in investment strategy upgrades, computing power and risk management.
Please discuss the improvement in performance of offshore Market Neutral investment strategy.
Since the launch of the strategy, we have continuously assessed performance and upgraded our models. Since December 2022, the strategy is able to generate Mingshi’s own idiosyncratic alpha, which aims for market risk neutrality.
Could you share your thoughts on the future outlook of the Chinese equity market?
Chinese equity market and quant asset management will continue to grow, due to:
- China is still an inefficient market and quantitative investment strategy can take advantage of it for uncrowded alpha
- Quantitative investment is the fastest growing segment of China asset management
- Investing onshore in China offers more diversification benefits
- Mingshi’s proprietary research shows diversifying to China A-shares produces higher return and Sharpe Ratio
Why quantitative investment strategy in China A-shares?
Second largest equity market in the world with retail investors accounting for over 70% of market turnover.
Mingshi has been at the forefront of quantitative investing in China High retail participation enables quant specialists to exploit their behavior, resulting in higher potential returns
Finally, please share Mingshi’s vision.
Mingshi’s mission is to become the industry leader for quantitative investment management in China.
Provide correct, timely information on China to Japanese investors. Trusted partner in China-A equity investment for international investors.
Mingshi is licensed with the SFC to provide securities advisory and asset management services (CE No. BRB143) with condition of serving Professional Investors only and not holding client asset.
Investment involves risks. The information contained in this interview is for general information and discussion only and does not constitute any recommendation, solicitation, or offer to deal in any securities or investments The information expressed herein are views or opinions only. If recipients have any doubt about the content, they shall seek independent advice. Mingshi shall not be liable for any losses or damages relating to adequacy, accuracy or completeness of the views or opinions.