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Tony Tang got his first teaching job in a university twenty years ago. A year later, however, he left the education sector, and became a freshman in the Chinese financial sector. Since then, he has witnessed China’s stock market grow out of nothing and develop to today’s enormous scale.

Tonny Tang

CIO

QuantBridge

Financial Holding Ltd

Global EMBA 2011

Tonny has enjoyed rich experience as a senior investment manager and from that time concluded three strategies for individual investors to deal with global economic uncertainties: 1. be defensive; 2. get more liquidity; 3. dilute risks.

2016 is the third anniversary of the CEIBS Global EMBA Class of 2011. During June and July, we will introduce stories from four 2011 graduates, to see the changes their CEIBS experiences have brought on their lives and careers. The second story is about Tony Tang, the Class Committee President.

A Veteran’s Story

Having grown up in a family of scholars, Tonny Tang received a good education. In the 1990s he was admitted to a Normal university without much difficulty and studied in the foreign language department. He quickly found a teaching job after his graduation in 1995 and had he followed the “script”, he would now be called “Teacher Tang” by his students.

But this is where the surprise comes in: Tonny is now the Chairman of FFC (Fortune Forging Capital Ltd.), and the CIO of QuantBridge – he has been working hard in the financial sector for almost two decades!

During his teaching time, Tonny was influenced by his brother working in one of the Big-Five accounting firms, and found he had an interest in accounting himself. A new window was opened: in 1997, Tonny joined the Shenyin & Wanguo Securities and worked in the investment banking department. At the end of that year, China set up the mechanism to run and manage separately each of the bank, stocks and insurance sectors.

Having gone through the formative years in the 1980s and preliminary experiments in the 1990s, China’s financial market was ready to set sail and test its durability. Right before its voyage, Teacher Tang got on board, and turned into a new captain.

“No matter dog-paddle or free-style, at least I have swum some distance now.” Recalling his days as a newcomer, Tonny gave himself a frank evaluation. Indeed, he has made considerable achievements, helping many Chinese companies get listed overseas; however, he always keeps objectively scrutinizing his own decisions and actions.

The longer he had been in the field, the stronger he felt the necessity for systematic and comprehensive business knowledge to help his self-evaluation process. Therefore, in 2011, Tonny applied for CEIBS Global EMBA.

In 2012, Tonny and three other partners founded a quantitative investment company – QuantBridge. One of the partners was Sun Lin, Tonny’s classmate in Global EMBA, and the other two were European quantitative experts who Tonny met during the overseas module of Global EMBA.

In fact, Tonny had already been an entrepreneur since 2004. He seized the moment when domestic capital was exploding, turned away from securities to focus on pre-IPO placement, and founded FFC which provides investment banking services. However, as PE started to flood in, capital price inflated and the market became irrational. Tonny realized this was the time to change: “every product and market will experience a period of high excess demand, during which expansion is easy and profit is promising; however, as the product or the market becomes mature, we then need to search for new opportunities.”

With this in mind, Tonny jumped into the market of derivatives and founded his second company, the QuantBridge. Comparing these two experiences, Tonny said that, before his studies in Global EMBA, he was more like a business-driven leader of a death squad: without any strategies or group structure being set, he would lead his soldiers into the battlefield and kill as many as they could. Nowadays, however, he is much like a go player, who considers carefully all his strategies, plans, team-building, resources, organisation, etc. “It is a business of my own that I really want to build now.”

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Ambitious CEIBS Partners from Quantitative Hedge Fund

‘A’ shares, B shares, close-end funds, open-end funds…Tonny has participated in the management of nearly every financial product in China. Thanks to his experience, he knows very well the meaning behind every market change. When the CSI 300 Index was introduced in 2010, Tonny realized immediately that derivatives would become an important part of the future of China’s financial market.

After communicating with Sun Lin, Tonny’s opinion became even stronger. Sun Lin is older than Tonny; he had more than 30 years of experience in the sector, with past jobs in Merrill Lynch Hong Kong, UBS, Credit Suisse, etc. The two Global EMBA students built mutual trust during their time at CEIBS and began their discussion about business. Eventually, they narrowed their focus down to one particular derivative – the quantitative hedge.

Quantitative Hedge, as its name suggests, combines the concepts of quantitative analysis and risk dilution. The former includes the use of statistics and mathematical models to determine the optimal investment strategy. And the latter refers to a way to manage and reduce collective systematic risks in the financial market, with the goal to achieve a relativelystable outcome. In fact, hedge funds often alternate between the traditional and the quantitative method. However, this does not mean that the quantitative hedge is identical to the common hedge.

“The quantitative and the common hedge methods are both ways to conduct investment. Before derivatives were introduced in China, the quantitative method didn’t have much room for application, because it was rather easy to analyze company performance. And there was also a lack of effective tools to conduct hedging activities. However, after the opening of the derivatives market, basic company performance analyses became outdated facing the need for complex calculations relative to stocks and bonds. This was the exact point when we saw the rise of quantitative tools, algorithm and computer technologies.”

During the European module of Global EMBA, Tonny and Sun Lin exchanged a great amount of information with the local financial experts. They noticed that quantitative hedge was mature in Europe. And they immediately realized that, if they could apply these financial tools and strategies to the market in China, the potential would be immeasurable.

But Tonny also knew that exact copies would not work. He needed a team that has both European experts of these advanced tools, and also Chinese elites who know the local market well. The original QuantBridge team was built following this strategy.

“For an asset-light industry like Finance, ‘people’ is the most important factor.” In Tonny’s opinion, in order to ensure smooth cooperation and produce effective outcomes, company partners should have similar education backgrounds, knowledge bases, personal traits, and overall, a mutual trust built on these similarities.

“QuantBridge Index Hedge Fund No.2”, co-issued by QuantBridge and China Merchants Securities co. Ltd., reached high rates of return of 51% in 2014, and 32% in 2015. It successfully caught the “mad cow” and overcame the stock market crash, which reflect its excellent capital managing abilities.

Tonny said delightedly that, if QuantBridge ever becomes the most famous hedge fund in China, it may be included as one of the CEIBS study cases. This is not only because that he and Sun Lin are CEIBS students, but also because QuantBridge shares the founding purpose of CEIBS: to create synergies between China and Europe.

Being Defensive – The Right Stance to Face Global Economic Uncertainties

Talking about the recent “Brexit” vote, Tonny said, “The prospect of ‘Brexit’ has brought more uncertainties and fluctuations to an already fragile global economy. China is a part of the global economy, and its market risks will thus increase following these impacts.”

Tonny believes that investors need to become more rational in their decisions:

Tonny also suggested that, under this market environment, investors should first evaluate the risks of their investments,such as the legal condition, credibility and performances of the managers, the credit ratings and performance stability of the products.

“The most appropriate investment should be the one that best fits your own anticipation of risks.”

Tonny further pointed out a latent problem created by the market: the current market sentiment, which excessively focuses on returns and ignores risks management, results in managers taking risky maneuvers to meet investors’ favors, which eventually leads to a large number of risk accidents and liquidation of funds; On the other hand, managers who insist on risk management are overwhelmed by those who promise high-returns – a classic moral hazard situation.

Nevertheless, Tonny still feels passionate and confident in the financial sector. He said that, if legal structure and a credit system can be introduced, China’s financial sector will have more room to develop. He further predicted that, building a credit-centered financial sector will be one of the core goals of China’s supply-side reform for the next couple of years.

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