FinTech startup, NMRQL Research, co-founded by former CEO of First National Bank Michael Jordaan has on Tuesday launched a machine learning powered unit trust fund, a first in South Africa. The fund is unique in that it uses machine learning to drive research, analysis and stock selection.
Jordaan, who headed up First National Bank for many years before stepping down at the end of 2013, now runs private investment company, Montegray Capital, while also providing a strategic-hand to various businesses including NMRQL.
NMRQL, of which Jordaan is director and chairman, is an investment management company with a bias towards quantitative research and algorithmic trading.
The NMRQL SCI Balanced Fund, administered by the Sanlam Collective Investments platform, is a FSB-approved Collective Investment Scheme that is Regulation 28 compliant, and aims to achieve steady long-term growth of capital and income.
“This will be achieved by investing in a diversified portfolio of domestic and international assets, where the asset allocation and stock selection is systematically managed using machine learning algorithms, a statement by the company read.
The machine learning powered, computational investment process enables NMRQL to discover hidden, patterns in underlying big data. Once discovered, these patterns can be exploited to forecast returns across all asset classes and markets, resulting in steady long-term growth of capital and income.
The fund is suitable for institutions, fund of funds and High Net-worth Individuals with a moderate aggressive risk appetite and an investment horizon of five years or longer, the company said. It may comprise a combination of assets in liquid form, money market and interest bearing instruments, bonds, corporate debt, equity securities, property securities, preference shares and convertible equities.
“Machine learning equips fund managers with the tools to assess historical and present data, to help predict future risks and returns based on large volumes of data. At NMRQL we process around 2 million data points each time we rebalance our portfolio. This could include quantitative, fundamental, economic or technical variables in order to discover and exploit repeatable patterns,” said NMRQL co-founder and CEO, Tom Schlebusch.
“In addition to the vast amount of data that the algorithm is able to process, the investment philosophy eliminates emotive decision making, which allows the model to remain rational at all times,” said Jordaan.
“As humans we suffer from various cognitive biases. These biases negatively impact our objectivity and reasoning skills daily, and are compounded when financial repercussions are involved.”