BACKGROUND

Introduction

In this challenge, act as if you were a cross-asset portfolio manager who wants to introduce machine learning techniques to generate insights applicable to an asset allocation strategy. We have selected a list of 19 futures that you can invest in. The list covers all asset classes: blue-chip equity indices, major government bonds and gold.

This is a very exciting challenge which gives you an opportunity to build an all-weather portfolio, switching opportunistically from one asset class / one region to the other to best surf economic / financial cycles using machine learning algorithms. The goal is to outperform the conventional playbook for asset managers which is to invest in equity and fixed income in equal proportion to weather different market conditions. See the benchmark section.


OBJECTIVES


Description

You must build a long-only, fully-invested (and non-leveraged) portfolio. You cannot hold more than 20% in any asset to avoid excessive portfolio concentration. Hence, your exposure to each of the 19 underlying assets should always be in a range of [0;+0.2] and your portfolio total exposure must always be +1.

Your objective is to maximize the annualized return of your portfolio, but also to minimize the drawdown expressed by the minimum 3-year rolling Sharpe ratio. These 2 metrics will be taken into consideration to select the winner(s) along with a robustness score.

Use the sample notebooks to get started:

Investment universe

The Investment Universe is composed of 19 (properly rolled) futures contracts covering all asset classes. The universe can be called using the getTickersGlobalAllocationChallengeV2 function.

Ticker Name Asset Class Currency
DM Dow Jones Industrial Equity USD
ES S&P 500 Equity USD
NQ NASDAQ 100 Equity USD
VG EuroStoxx 50 Equity EUR
Z FTSE 100 Equity GBP
SMix SMI Swiss Market Index Equity CHF
NX CME Nikkei 225 Equity JPY
HI Hang Seng Equity HKD
KM KOSPI 200 Equity KRW
XP ASX 200 Equity AUD
TU US 2-Year T-Note Fixed Income USD
FV US 5-Year T-Note Fixed Income USD
TY US 10-Year T-Note Fixed Income USD
US US Long Bond Fixed Income USD
RX German 10-Year Bund Fixed Income EUR
G UK 10-Year Gilt Fixed Income GBP
JB Japan 10-Year Govt Bond Fixed Income JPY
XM Australia 10-Year Govt Bond Fixed Income AUD
GC COMEX Gold Commodities USD

Benchmark

The benchmark will be 50% MSCI World Index Total Return (USD unhedged) and 50% JP Morgan Global Bond Index (USD hedged) with a monthly rebalancing. To check the time series:

Portfolio constraints

Maximum exposure of 20% for each asset at any rebalancing date.

Strategy transactions

Transaction costs: 1 basis point (bp) of the amount being transacted. As an example, if you sell 10% of S&P 500 and buy 10% of US 10-Year T-Note, the cost will amount to 20% x 1 bp = 0.2 bp.

Transaction frequency: The maximum transaction frequency is daily (no intraday trades). All trades are executed at market close prices.

Transaction signals: Transaction signals must be based on data available at the close-of-business day. Signals are 'executed' the same day following the Lag 0 model convention.

First transaction: First weights have to be generated before/on 2004-01-02 (1 year calibration/training. Rolling/expanding windows are allowed). If returns are NA for a particular asset, the weights assigned to it has to be 0.

Rebalancing penalty: 2 basis points on the total AUM, each time you have a date with a set of weights, it will be considered as a 'rebalancing' day and you will incur the penalty. Please check the example notebook and check the page Rebalancing and transactions costs

Backtest period

The in-sample period runs from 1 Jan 2003 to 31 Dec 2018. To prevent any overfitting of the models, data for 2016-2018 will only be unveiled after your first model submission.

Note: Once your first submission is approved, you can revise it as much as you want.

Submissions

You must use Notebook to submit your solution. You can only submit one notebook. However, there is no limitation in the number of revisions you can make on a submitted notebook. If the solution follows a theoretical or academic paper, the participants are encouraged to attach the document with the submission, any relevant document (own paper or other document) to explain the approach used will increase the robustness scoring.

Please visit our Submissions page for all details on how to submit.


SELECTION CRITERIA

The strategies will be ranked based on the weighted arithmetic mean of their following two rankings:

Performance Metrics Metric ranking Weight
Normalized Annualized Return AR 40%
Normalized Robustness Rank RR 30%
Normalized Minimum Rolling Sharpe Ratio (*) MRSR 30%

(*) The Minimum Rolling Sharpe Ratio will be calculated over a period of 3 years.

Note:

  • The out-of-sample period will not be disclosed.
  • If there are multiple versions of the same notebook, only the latest version will be taken into consideration.

AWARDS

The total prizes in euros for the winner are:

  • Champion: iPad Air 64GB Wifi
  • First runner-up: Apple Watch model SE GPS 40mm
  • Second runner-up: Apple Watch model SE GPS 40mm.</p>

    Prize for Challenge.PNG

  • The opportunity to get your strategy licensed by Asset Managers looking for such asset allocation strategies

TIMELINE

Challenge Starts

Tuesday 17, August 2021.

Research Ends

Monday 29, November 2021 midnight NY time.


DATA

The only available input data for this competition are: Close price of the 19 tickers listed in the Investment Universe section above.

The data can be called using the getTickersGlobalAllocationChallengeV2function.


PARTICIPANTS

The Challenge will be open to any Participants (academic or non-academic) in the world.

  • Individual: One person. Register as Individual
  • Team: A team is a group of individuals which have registered to participate in the Challenge. A Team can be composed of 2 to 3 individual(s). Register as a team


ALPHIEN POINTS

Submit early to earn points that will help you win the competition !

  • Starting from 1st of September 2021 and every Wednesday until 20th of October 2021, the top 5 users ranked by the selection criteria will earn Alphien Points allowing them to unlock special features for the Global Allocation Challenge!
    • 1 Extra Submission. Remember that you can only submit one solution by default.
    • 1 Special 30 min consultation with a Senior Quant.
    • 1 Fastpass to bypass the reviewing queue and receive a guaranteed feedback within 24 hours. Without a fastpass, it can take some time before you receive proper feedback because strategies need to pass an extensive checklist before being approved.
  • Unlock these features directly from your user profile page.


Weekly point rewards

Ranking Points
1 15
2 11
3 7
4 3
5 1



GUIDELINES

Support tools

  • After you have joined the competition, click the "get started" button. You will be redirected to your dashboard. In "Public Notebooks", filter notebooks by competition tag using the "Global Allocation Challenge" tag.
  • Read about How to avoid look ahead bias to maximise your chances to win.
  • Use the Forum to find help from the community or from Alphien support team.

Tips and advice

  • Use AlphienLab to conduct your research.
  • Once you have fine-tuned your model, document it in a notebook and submit the notebook for our review.
  • We highly recommend you use the Forum as much as you can to get support.

RULES

The Challenge will be open to any Participants (academic or non-academic) in the world, but Alphien reserves the right to reject some applicants if terms of the platform are violated. In particular, you must not copy code or intellectual property which is not your own or is not open sourced. You can not participate as a professional if your employer can claim ownership in any part of your work on the Alphien platform; in case of conflict please contact and discuss with the Alphien team. Alphien is open to free scientists who own their intellectual property.


LEGAL

Please refer to Alphien Terms of Use.