>>> Quant allocations to rise in 2019, manager claims

A French asset manager is predicting a rise in quant investing over the next 12 months, although transparency concerns about the industry remain.

A survey conducted by La Française Investment Solutions (LFIS) among about 150 quant professionals found that 70% of asset allocators were considering allocation to quant strategies in 2019, LFIS said.
The survey was carried out at a quant conference LFIS partly organised and the firm argued that investors and allocators were increasingly favouring the “benefits of a systematic-based approach”.
For two thirds of respondents the key benefit was the elimination of behavioural bias in these rules-and-statistics-led strategies. Additionally just over a quarter also cited the desire to access new sources of performance (28%). Together these were seen as the biggest benefits of quant funds.
Arnaud Sarfati, co-founder of LFIS, said that the results showed a better understanding of quant strategies among investors and the growing influence of technology and data.
“As the lines between systematic and discretionary styles converge, this will enable the quant finance sector – including academia, managers and investors – to work collectively to promote knowledge sharing and understanding across quant approaches and move the industry forward,” said Sarfati.
However, a perceived lack of transparency was cited as the biggest challenge facing quant strategies by 39% of respondents, while just under a third cited a lack of casual reasoning and imagination.
Transparency concerns were raised as an issue for quants in another survey last year.
Guillaume Garchery, head of quantitative research and development at LFIS, said: “As allocations to quant strategies increase and the number of available strategies grows, it’s important to remember that managers need to have explainable models behind the theory and be able to convey an understandable and sustainable portfolio construction process to investors.”

WSJ : China Vice President Urges Governments to Address Their Domestic Problems

China Vice President Urges Governments to Address Their Domestic Problems
In speech at Davos, Wang Zishan says reducing income inequality at home, rather than seeking scapegoats abroad, should be priority

Governments should counter a rising backlash against globalization by reducing income inequality at home rather than seek scapegoats abroad, China’s vice president said in a speech at the World Economic Forum’s annual meeting Wednesday.

Over recent decades, companies have spread their activities and associated jobs across an increasing number of countries, a process known as globalization that relies on the free flow of goods, capital, and to a lesser extent people across national borders.

However, voters in a number of developed economies have in recent years elected leaders openly hostile to those flows and globalization, leading to a recent rise in tariffs and other barriers to trade.

Speaking in Davos, Chinese Vice President Wang Qishan said that protectionism and populism were on the rise, and they pose “serious challenges” to globalization. He said widening gaps between rich and poor within countries helped explain the backlash, and called on governments to address their domestic problems rather than transferring blame onto others.

“What we need to do is make the pie bigger while looking for ways to share it in a more equitable way,” he said. “The last thing we should do is to stop making the pie and just engage in a futile debate on how to divide it. Shifting blame for one’s own problems onto others will not resolve the problems.”

Mr. Wang didn’t mention the U.S. in his speech, but his comments come as the two countries seek ways to resolve a trade dispute that was initiated by U.S. President Trump, who cites China’s large trade surplus as evidence that the existing relationship is unfair.

China’s vice president also delivered a thinly veiled rebuttal of U.S. attacks on its technology companies and policies.

“It is imperative to respect national sovereignty and refrain from seeking technological hegemony,” Mr. Wang said. He condemned “conducting, shielding or protecting technology-enabled activities that undermine other countries’ national security.”

Mr. Qishan didn’t specify what activities he was referring to, but the remarks appeared to be a response to escalating U.S. pressure against China and its technology companies, notably Huawei Technologies Co.

The U.S. has discouraged the use of Chinese-made equipment, in particular Huawei’s, in U.S. telecommunications networks and pressed other countries to do the same. It is seeking the extradition of a top Huawei executive from Canada on allegations of violating sanctions against Iran. Forced transfer of technology to Chinese competitors is a central U.S. complaint in the countries’ current trade negotiations. China denies it forces foreign companies to transfer their technology, and Huawei denies that its equipment is used by the Chinese government to spy on its customers.

“We need to respect the independent choices of model of technology management and of public policies made by countries, and their right to participating in the global technological governance system as equals,” Mr. Wang said.

Answering questions following his speech, Mr. Wang said confrontation between China and the U.S. harms both nations.

“For the Chinese and U.S. economies, I believe they are in a state of mutual indispensability,” he said. “There has to be mutual benefit and win-win.”

FT : US authorities quiz Deutsche Bank over scandal at Danske

US authorities quiz Deutsche Bank over scandal at Danske
Federal Reserve examines German lender’s role in a €200bn money-laundering case


Deutsche Bank has been asked questions by US regulators about its role in the €200bn money-laundering scandal at Danske Bank’s Estonian offshoot, the German lender said on Wednesday morning.

“There are no probes but [we] received several requests for information from regulators and law enforcement agencies around the world,” Germany’s largest lender said in a statement.

Deutsche Bank was one of several correspondent banks used by Danske’s Estonian branch and it processed more than €160bn of potentially suspicious cross-border payments for the unit.

The scandal could provide a prominent test of whether banks are held accountable for the actions of the customers at rival banks when they clear US dollar transactions for other lenders.

Danske is being investigated in several countries for handling €200bn of money that flowed through its tiny Estonian unit on behalf of non-resident customers from Russia and other former Soviet states between 2007 and 2015.

After Deutsche Bank’s internal controls flagged a rising amount of suspicious transactions at Danske’s Estonian unit, it reported them to authorities and stopped clearing US dollars for the branch in 2015.

The German bank said on Wednesday that it “continues to provide information to and co-operate with the investigating agencies”. It was responding to a Bloomberg report that the US Federal Reserve was examining Deutsche Bank’s role in the scandal.

But Deutsche Bank said it was not the subject of any formal investigation by watchdogs over its role in the Danske scandal. It added that investigating authorities as well as the bank were interested in “the lessons to be learned” from the case.

As regulators have clamped down on dirty money flows, the world’s biggest banks have cut back on the number of correspondent banking relationships they have — fearing they could be punished for wrongdoing by customers of other lenders.

JPMorgan Chase was the first correspondent bank for US dollars to terminate its relationship with Danske in Estonia in 2013. Bank of America made a similar move two years later.

BaFin, Germany’s financial watchdog, asked Deutsche Bank for information about the affair late last year. However, a person familiar with the thinking of a senior European anti-money laundering official pointed out that Deutsche Bank’s customer was Danske, not the clients of the Danish bank who may have done suspicious transactions.

The person added that correspondent banks have neither the legal obligation nor the practical means to “know its customer’s customers”, hence Deutsche Bank’s regulators in Germany “are not losing sleep” about its role in the scandal. 

A senior Deutsche Bank executive told the Financial Times in December that the lender was not aware “of any instances in which a correspondent bank has been held responsible for the know-your-customer failings of an originating bank”.

Christian Sewing, Deutsche Bank chief executive, said earlier this month that his bank investigated the Danske case long before the issue became public knowledge. The lender then started a second internal probe in October last year.

“We do have a big interest in continuing to get to the bottom [of it],” Mr Sewing said. “So far, we do not have any evidence for misconduct on our side.” A person familiar with Deutsche’s internal investigation said on Wednesday that this assessment was unchanged.

Shares in Deutsche Bank rose 1.6 per cent on Wednesday. Since hitting a new all-time low in December on concerns about the bank’s legal woes, the stock has risen close to 17 per cent. 

>>> U S Gapping down


Gapping down
In reaction to disappointing earnings/guidance:

  • TSE -12.3%, COF -5.9%, QUOT -2.6%, LRN -2%, ROL -1.6%, IBKR -1.1%, SRLP -0.8%, HOPE -0.6%

Other news:

  • AVCO -24.3% (after closing up more than 120% on the day)
  • PTCT -9% (commences offering of $200 mln in common stock)
  • CWST -5.1% (proposed underwritten public offering of 3.1 mln shares of its Class A common stock)
  • TIGO -4.3% (Millicom International Cellular confirms preliminary discussions regarding possible offer for all the shares of the Company have been terminated by Liberty Latin America (LILA LILAK) without an offer being made)
  • APHA -3.4% (halted in Canada)
  • CPLP -2.7% (lowers qtrly cash distribution to $0.045 per common unit, prior $0.08 per common unit)
  • QCOM -1.7% (continued weakness being attributed to Kerrisdale short speculation and ahead of earnings next week on Jan 30 after the close)
  • URGN -1% (UroGen Pharmat o offer $150 mln of ordinary shares in an underwritten public offering)

Analyst comments:

  • WSM -2.7% (downgraded to Underweight from Equal-Weight at Morgan Stanley)
  • AGCO -1.5% (downgraded to Underweight from Equal Weight at Barclays)
  • MYL -1.4% (downgraded to Neutral from Buy at UBS)
  • TSLA -1.3% (downgraded to Underperform from Sector Perform at RBC Capital Mkts)
  • TXRH -1.3% (downgraded to Hold from Buy at Stifel)
  • TOL -1% (downgraded to Neutral from Buy at Mizuho)
  • MRK -0.8% (downgraded to Market Perform from Outperform at BMO Capital Markets)
  • PFE -0.8% (downgraded to Neutral from Buy at UBS)
  • DLPH -0.7% (downgraded to Sector Perform from Outperform at RBC Capital Mkts)
  • LOW -0.6% (downgraded to Hold from Buy at Loop Capital)