The markets are historically volatile during thecoronaviruspandemic, throwing conventional risk management strategiesout the window.<\/p>\n
Demanddissipated as investors and traders reduced risk into the drop.<\/p>\n
The Financial Learning Information Platform, or iFlip, a leading algorithmic intelligence wealth manager, said its trading strategies saved investors 28% in losses in the crash.<\/p>\n
What Is iFip?<\/p>\n
iFlip is a wealth management app that leverages mathematics to hedge investors out of the market when the risk of a trade is not worth the reward.<\/p>\n
The firms investing tools and proprietary trading methods were pioneered by leading Wall Street Trader Kelly Korshak, iFlips co-founder, who worked at the CME Group Inc (NASDAQ: CME), CBOT, Tudor Group, Brevan Howard, and Deutsche Bank AG (NYSE: DB).<\/p>\n
Through the use of AI, we are now providing access to long-term investment vehicles that were not available in the past, Korshak said in a statement to Benzinga in January.<\/p>\n
The platform reduces uncertainty through statistical modeling and AI, helping iFlips S&P 500 investors generate returns in excess of 400%, over a 15-year period.*<\/p>\n
AI Pulls Back Before The Crash<\/p>\n
In November, iFlips algorithmic intelligence removed investors from the market due to the risk of near-term reversion.<\/p>\n
We got out originally in November of 2010, said Korshak. The algorithmic intelligence felt that the market was overbought.<\/p>\n
Back then, the coronavirus was not a concern. Instead, regardless of fundamentals, downside risks exceeded the upside reward on a go-forward basis.<\/p>\n
We believe price tells all, said the iFlip co-founder. Fundamental information is interpreted instantly by the markets electronically. We know that information is coming out in real-time and were able to respond to it in real-time.<\/p>\n
The market had already made a substantial move from its prior lows, and the probability of a reversion to the mean was too great, he said.<\/p>\n
After a small sell-off, the AI re-entered the market in December and defined risk via a dynamic stop.<\/p>\n
Navigating The Crash<\/p>\n
The ultimate bottom was 32.3%, said Korshak. Literally inside of weeks, ... we lost more S&P 500 points than in the 2008 financial crisis.<\/p>\n
On a non-algorithmic basis, active managers suffered tremendously in the crash, further weighed down by fees and mandates, according to iFlip.<\/p>\n
The reason mutual funds dont do well beyond their high fee structures is that they are also subject to mandate, said Korshak.<\/p>\n
A mutual fund may have a mandate that forces the manager to have 90% of monies invested at any given time to satisfy redemption requests. In passive ETF investments its all-in-all-the-time.\"<\/p>\n
If the market is dropping and a trader takes 90% of the losses, it doesn't do them any favors, he said.<\/p>\n
The iFlip AI did suffer some damage in the crash, giving up close to 5%.<\/p>\n
Korshak said he made a note about cross-asset volatility and the old mantra that diversification wins out in a fight against losses.<\/p>\n
Weve learned this over many occasions over the last 30 years geographical diversification is meaningless over time as we become a global society, he said.<\/p>\n
Growing, learning algorithms will always be superior to an actively managed account, the co-founder said. \"Even though the correlation of bond and equity prices is still negative, the diversifying element in term of price offsets will eventually decouple in a sustained low-interest-rate environment.\"<\/p>\n
And Korshak is right: when the U.S. market began its sell-off in February, global assets became increasingly correlated, with emerging markets and commodities taking thedive together.<\/p>\n
iFlip's Future<\/p>\n
iFlip is capitalizing on the recent market crash to introduce a recovery portfolio, an average dollar-weighted custom ETF.<\/p>\n
The product is composed of stocks such as Exxon Mobil Corporation (NYSE: XOM), AT&T Inc (NYSE: T), Carnival Corp (NYSE: CCL), Bank of America Corp (NYSE: BAC) andChefs Warehouse Inc (NASDAQ: CHEF).<\/p>\n
\"If theres a recovery, we think that portfolio will double, and if we think mathematically it is more likely to double than to lose half,it is a bet we should look to take,\" Korshak said.<\/p>\n
If the portfolio were to endure unforeseen volatility, then the AI would leverage its proprietary algorithms to manage risk and hedge out investors, he said.<\/p>\n
To learn more about iFlips proven trading systems, visit iflipinvest.com.<\/p>\n
*Results over 15 years are hypothetical. Past performance is no guarantee of future performance.<\/p>\n
Photo courtesy of iFlip.<\/p>\n
See more from Benzinga<\/p>\n
2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.<\/p>\n
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