Quant Strategy Onboarding Due-Diligence Process

At Kvants, the onboarding procedure for quant strategies on our platform is thorough and multifaceted. It aims to protect the interests of our users while maintaining the utmost standards of trading outperformance.

At Kvants, we want to provide DeFi investors with the same grade of due diligence as top asset managers. When constructing our Quant Strategy Due diligence process, we took inspiration from Goldman Sachs and their External Investments Platform to apply the robust due diligence to investment strategies we will provide on our platform.

  • Goldman Sachs - XIG Platform - offers investors vetted and verified funds to invest in with confidence.

  • There is a very strong barrier to entry, premiere platform, associated with strong names.

  • In crypto, we want to deliver the same grade of due diligence for the quantitative strategies listed on our platform.

Understanding Quant Strategy Fundamentals

  • Strategy Overview: An initial review of the strategy's core principles, historical performance, and underlying algorithms. This stage involves a comprehensive understanding of the strategy’s objectives, market focus, and the mathematical models employed.

  • Risk-Return Profile Analysis: Evaluating the risk-return trade-off of the strategy, including its historical drawdowns, volatility, and overall performance consistency.

Technical Evaluation and Backtesting

  • Algorithm Inspection: A thorough examination of the strategy's algorithmic foundations, including code review, to ensure they are sound, well-documented, and built on logical and transparent premises.

  • Backtesting Under Various Market Conditions: Rigorous backtesting of the strategy using historical data across various market conditions to assess its adaptability and resilience.

Compliance and Regulatory Adherence

  • Regulatory Compliance Review: Ensuring the strategy adheres to all relevant financial regulations and trading standards, including checks against market manipulation practices.

  • Legal Framework Alignment: Verification that the strategy complies with legal requirements, including intellectual property rights and data usage laws.

Risk Management Protocols

  • Stress Testing: Stress testing the strategy under extreme market conditions to evaluate its responses and the effectiveness of its risk management protocols.

  • Liquidity and Leverage Analysis: Assessing how the strategy manages liquidity risk and leverage, including its approach to mitigating potential liquidity crunches.

Performance and Operational Stability

  • Consistency in Returns: Analyzing the consistency and reliability of returns over various time frames, emphasizing the strategy’s ability to perform under different market trends.

  • Infrastructure Robustness: Evaluation of the operational infrastructure supporting the strategy, including trade execution systems, data feeds, and cybersecurity measures.

Quant Team Expertise and Track Record

  • Team Assessment: Reviewing the qualifications, experience, and track record of the team behind the strategy to ensure they possess the necessary expertise and have a history of success.

  • Ethical Standards and Conflict of Interest Checks: Ensuring the team adheres to high ethical standards and that there are no conflicts of interest that could adversely affect strategy performance or client interests.

Client and Market Impact Assessment

  • Market Impact Analysis: Estimating the potential impact of the strategy on the broader market, especially in terms of liquidity effects and market stability.

  • Client Suitability: Evaluating the strategy’s suitability for our client base, considering factors such as investment minimums, target demographic, and risk tolerance.

Ongoing Monitoring and Review

  • Continuous Performance Tracking: Implementing systems for continuous monitoring of the strategy’s performance and risk metrics.

  • Regular Reviews and Audits: Scheduling periodic reviews and audits of the strategy to ensure ongoing compliance and performance alignment with initial evaluations.

Last updated