© 2019 by BizQualify, LLC 

CAPITAL MARKETS

BQ Public Companies: 

main use cases

 

QUANT

  • Factor investing

    • Factors uncorrelated with Fama-French market & fundamental factors

    • Sharpe ratios of 1.5 - 2.0

  • Employment & benefits factors

    • Metrics uncorrelated with size factors, e.g. market cap

  • Short selling signals

    • Delinquency in payments, downward trends in employment, restatements

fundamental

  • ESG: SASB Human Capital

    • Generosity of company with employee welfare & retirement

    • Quantitative (not qualitative) measures

  • Employment & benefits trends

    • Employment & benefits not reported in SEC filings

  • Questions for management

    • Ask management about changes in employment & benefits

BQ Private Companies: 

main use cases

public capital markets

  • Supply & value chain

    • Financial viability of key customers & suppliers

  • Market share & sizing

    • Complete view of an industry

  • Fixed income

    • Credit of private debt issuers

banking, PE, M&A

  • Prospecting

    • Build lists based on industry, revenue, EBITDA, growth

  • Comps & valuation

    • Compare private & public firms using the same verified financial metrics

  • Due diligence & KYC

    • Legal ownership & identity

axioma backtest of BQ

 

Fama-French Style Model:

  • Russell 3000 universe

  • Oct 2011 – Oct 2017

  • Holding period of one month

  • Transaction costs not included

Market Based Factors:

  • Liquidity

  • Market sensitivity

  • Volatility

  • Momentum

  • Size

Fundamental Factors:

  • Value

  • Leverage

  • Growth

  • Return on equity

  • Dividend yield

Industry Factors:

  • 68 GICS-based industry classifications

Below are backtested results for a factor relating to participants in a retirement plan. Note that residual returns increase throughout the time period. 

battlefin backtest of BQ

  • S&P 500 universe

  • Oct 2013 – Oct 2016

  • Holding period of one month

  • Long/short portfolios

munis & macro

Industry, MSA, county, & state metrics that aggregate data on 13M+ companies covering 95%+ of U.S. employees

 

Business and Employment Dynamics

Source: Yin Luo et al., Deutsche Bank Report on BizQualify, 2016, Figure 9

Employment Growth by Sector

Source: Yin Luo et al., Deutsche Bank Report on BizQualify, 2016, Figure 8

bq competitive advantage in

munis & macro

  • Precise labor status
    • An employee is someone eligible to receive benefits at a company
  • Complete coverage
    • All companies with employees

    • Over 13 million companies with over 20 million locations

  • Granular view
    • Drill down by industry, region & company to identify drivers

historical solution:

government statistics

  • Ambiguous labor status
    • Self-reported by households in a survey (DOL)
  • Limited coverage
    • 60k households in survey (DOL)

    • 150k companies & government agencies in survey (DOL)

  • Opaque view
    • Cannot drill down into specific companies or detailed industries

bq solution

esg: governance & benefits

“We believe therefore that incorporating the benefits metric into an ESG portfolio could add some additional diversification benefit while promoting the governance of the companies it invests in. We will furthermore show that the benefits factor exhibits positive out-of-sample alpha at a very low turnover, further boosting its value to an ESG portfolio.”

Yin Luo et al., Deutsche Bank Report on BizQualify, 2016, page 31

  • BQ Welfare Score
    • Average of welfare benefit indicators (e.g., health, dental, vision)
    • Quantifies how well the company promotes employee welfare
  • BQ Retirement Score
    • Average of retirement benefit indicators (e.g., 401k, profit sharing)

    • Quantifies how well the company promotes retirement planning

  • BQ Benefits Score
    • Sum of Welfare and Retirement Scores

    • Quantifies how well the company treats its employees overall