How Quantumrock has “industrialized” the development of trading models through AI and achieved material outperformance
According to Quantumrock's CEO Stefan Tittel, his firm is an AI-driven tech company in asset management rather than an asset management company applying “a bit” of technology. He quickly adds that this is “not a subtle but a major difference.”
Founded in 2012, Quantumrock's aim was to develop a systematic scientific investment process to generate sustainable risk-adjusted returns for their proprietary trading activities. Their flagship strategy VSOP (Volatility Special Opportunities Program) has now a four-year track record with an 18% annualized return and achieved a significant outperformance: the COVID crisis of 2020 has been playing to Quantumrock's strengths with VSOP performing in both crash and recovery environments.
Since the beginning, Quantumrock has focused on machine learning and artificial intelligence methodologies to make an asset manager’s core function truly scalable: the discovery process of new trading models. However, Quantumrock's experts are quick to point out that simple “out of the box” Machine Learning applications will fail when it comes to trading signal generation. Therefore, development, implementation and trading are closely monitored and supervised by the firm's in-house capital markets and risk management experts, which you will get to know in this video as well.
VSOP is a systematic multi-strategy approach that combines the advantages of balanced portfolio long-term risk-returns with the short-term hedging and alpha capabilities of a volatility overlay portfolio. It is designed to optimize the Sharpe ratio but also for asymmetric returns. The balanced/beta portfolio component (US equities via S&P 500 futures with US bond futures) is intended to generate risk-adjusted returns in bullish market phases by capturing positive market trends while the Volatility Alpha Overlay takes long and short positions in the VIX future. The overlay activates situationally in phases of increased volatility, aiming to capture volatility spikes and to generate alpha. Further, it provides downside protection by minimizing or even overcompensating potential losses from the balanced portfolio, without the disadvantages typically associated with volatility trades. In addition, trading models are dynamic (parameterized) and adaptive to changing environments, explains Dr. Dr. Roman Gorbunov, Head of AI-Systems at Quantumrock.
Quantumrock's VSOP targets a volatility of 10% and is available via their new UCITS fund (in EUR, USD & GBP) as well as managed accounts and on Deutsche Bank's dbSelect platform where it is the only AI player and one of the top performers.