“After November’s momentum change, stocks continued their rally in December due to the Covid-19 vaccine releases and reliefs, and the US Congress making progress on the new fiscal stimulus bill. The S&P 500 closed the month of December up 3.2%, while Treasuries remained flat.
The portfolio closed the month with a performance of +0.2%. The overlay portfolio contributed with -0.69% losing mainly on seasonal pattern strategies. The balanced component gained +0.89%.
In 2020, both the alpha generating overlay as well as the beta portfolio of VSOP performed exceptionally well. The overlay contributed +23.62 per cent and the beta portfolio (S&P 500 futures and US bond futures) had a contribution of +7.31 per cent. This reflected the strength of the product during a time of sharp market volatility” Commenting on the performance, Michael Zeller, CIO
Quantumrock VSOP YTD Performance, as of December 31, 2020
Looking forward to 2021, CEO Stefan Tittel, commented on the influence AI and machine learning can have on investment strategies:
“2020 has seen many specialised core Artificial Intelligence (AI) investment managers coming to the fore as investors look to protect downside risks and seek crisis alpha capabilities. As part of this, we have also witnessed a growing appetite for rule-based investment decisions (ie, systematic strategies), rather than discretionary, and in this context also a greater openness towards AI-driven approaches.
Developments in natural language processing, in particular models based on transformers, are increasingly helping systematic investors to capture and process multiple sources of data (textual, image and audio) with a higher degree of automation by broadening the reach and improving efficiency. Meanwhile, white-boxing machine learning models are helping to enhance human understanding of algorithms through transparency and accountability.
Machines have access to an infinite number of trading opportunities, so models are constantly adapting to market trends, making them more dynamic.
2021 will likely be another year of increased volatility. Machines will continue to be on the lookout for opportunities throughout all points of the market cycle. Uncertainty is the most significant challenge facing investors. With AI, this uncertainty is handed to an algorithm where the predictions and timings are completely automated. Emotional and cognitive biases can be removed over time, making AI and machine learning a much better solution for the long and short-term.”
About the Volatility Special Opportunities Program (VSOP)
VSOP entails a systematic multi-strategy approach in the S&P 500 index volatility market with a real-money track record dating back to July 2016. The program is composed of a Balanced Portfolio consisting of S&P 500 futures and treasuries with a duration risk of circa five years. It also trades overlay strategies on situational volatility patterns. In total the portfolio shows a lower risk profile than the S&P 500, hence VIX long strategies reduce the beta to the S&P 500 by hedging the tail risk.
Quantumrock is an AI-driven investment technology asset manager working to disrupt traditional asset management. Founded in 2012, our aim was to develop a systematic scientific investment process to generate sustainable risk adjusted returns for our proprietary trading activities. Now experts in machine learning and artificial intelligence methodologies, our clients turn to us to provide them with a competitive edge in today’s market.