Matjaz Zadravec and Stefan Frieb - Royal Vision Group
Royal Vision Group – Gamechangers of the Year with the Two Brain System
Royal Vision Group is a fast-growing and multi-awarded Alternative Investment firm, which has pioneered a new trading technology, the Two Brain System, to support the Royal Vision Intelligent Fund strategy.
Their fund has shown outstanding net returns on capital and risk mitigation, with a 23.52% annualized return at an annualized volatility of 2.60%, resulting in a Sharpe ratio of 8.94 as of August 2017. With this kind of year-to-date performance, Royal Vision Intelligent Fund has established itself among the top-ranking professional funds in the industry. Their growth rate, business model, and performance have been taken into account by global industry peers, nominating Royal Vision Group and its Royal Vision Intelligent Fund as the ACQ5 Global Awards 2017 category winner - ACQ5 International Gamechanger of the Year and the ACQ5 International Niche Solutions Provider of the Year for asset management.
We have met with Mr. Matjaz Zadravec, Chief Executive Officer, and Mr. Stefan Frieb, Chief Investment Officer, of the Royal Vision Group in their headquarters in Dubai International Financial Centre to better understand their success in disrupting the industry and becoming this years’ ACQ5 Global Gamechangers.
Mr. Zadravec and Mr. Frieb say their business groundwork is based on “going back to the roots”. Looking as far back as the 17th century, when the first Amsterdam stock exchange was established. The reason for it is the core and time-honored values were strictly focused on how to create value for the investor’s given trust and how to create a mutually beneficial relationship. They are bringing strong business values to the 21st century with a smart, slim, flexible, and technology supported organization. With this frame of mindset as the base of the Royal Vision Group business model, they have combined it with their own advancements in today’s computing technology to form a new and game-changing modus for providing professional investment solutions in a more sustainable and profitable way. The complete business structure and the technology were developed for over 10 years by high-level industry experts and tested for over 3 years on a live market with proprietary funds. These tests were used strictly to establish the right foundation for their research, development, and proof of concept. Despite their conservative approach to investing during the testing period on their proprietary funds they have achieved a 3-year cumulative net return of 113.64%, 3-year annualized net return of 28.79% at a 3-year annualized volatility of 5.33%.
Today, after 17 months since inception (33.73% cumulative net return) of the regulated Intelligent Fund, they have already been recognized and awarded by the worldwide financial industry. Amongst others, there is also BarclayHedge, where they are frequently recognized and awarded for their net performance in the stock index sector. The Intelligent Fund’s investment objective is to provide the qualified investor with a 24% net annual return with a one-digit annualized volatility. Its performance base is in sustainability, producing consistent positive monthly returns, and in minimizing its downside deviation.
The Royal Vision Intelligent Fund takes an impressive stance with its performance results without negative months, 15.12% net year-to-date, 23.52% net annualized return, 10.52% net return for the rolling 6 months, naming just a few of the key fund statistical data for the track record of August 2017.
If the performance alone did not grasp your attention, then the unique technological achievements supporting the fund and the business model surrounding it, surely will. Continuing the talk with the two founders, Mr. Matjaz Zadravec and Mr. Stefan Frieb, show us how the technology came to be and how it functions.
In a nutshell, the process begins with identifying the financial industry’s foremost belief about value creation and then articulating the notions that support this belief. By turning one of these underlying notions on its head – reframing it – not being a traditional fund, nor being a quant fund.
The Intelligent Fund’s unique technology is called the Two Brain System. It is an optimal blend of a computer-based intelligent quant model and a results-driven team of experienced professionals. Where the computer analyses the market with lightning speed, makes suggestion based on its smart examination of data for a potential trade with probability parameters, and then feeds the information to the professional trader to give a secondary evaluation before executing the trade.
The computer brain or Aia (Artificial Intelligent Assistant) is an industry’s first true form of a virtual trading assistant, which is holding unparalleled skills in numerical modelling, pattern recognition, research, focus, control, record keeping and final advising. Eliminating all inferior human capabilities, such as slow analytical thinking, limited research, concentration, emotional self-control and disposition, and advisory bias. It covers a completely new approach to trading endeavors, where the technology is not the final executor of the trade, but rather smartly assists the experienced professional traders in reaching risk mitigation stability and in achieving a superior net return on capital.
How to best understand the Two Brain System and its backbone, Aia - the artificial intelligent system, Mr. Frieb firstly explains it with an analogy on how meteorologists are predicting weather forecasts.
Similar to atmospheric science systems, Aia is using the advancements in supercomputing technologies, numerical methods and machine learning, combined with financial market data to quickly uncover patterns and merge those with current observations to predict what might happen in the near future. Just like how meteorologists calculate the probability of a day being sunny or cloudy, adding the chance of it being rainy, they can in a similar manner calculate how the market will precisely behave and at what risk levels.
But when talking about how the complete Two Brain System functions, they compare it to a race car and a professional driver – where the race car is the computer-based artificial intelligence and the professional driver is the experienced professional trader. The technology acts as an aid, which supports the experienced trader to achieve the best performance possible.
On an empty race track an autonomous racing car would probably outperform a human driver at delivering the fastest lap time, but when you add the factor of a competitive format with additional racers on the track, the technology alone will not suffice. In their case, they correlate it to a live market with multiple active traders placing their orders in fractions of a second, thus constantly changing the market variables. For example, at a Formula 1 Grand Prix, there are multiple effects of randomness you need to take into an account, behaviour of other racers, unpredictable and constantly changing track and weather conditions during the duration of the entire race, material degradation, etc.
Mr. Stefan Frieb comments, the talent and skill of a driver are vital to a winning race car. And what is also quite clear is that the right race car is also vital to create a winning driver. In order to win the race, not only do you need a professional driver’s human input to defy the impermanence of the competition, but also a supporting system, i.e. a racing car and a “pit box crew” for managing the risk.
In the case of the Two Brain System, they reflect on the idea, where they are combining top technology with top talents to tackle the constantly changing market conditions.
As Mr. Frieb continues with further insights, he shows us how the trading process works. The Two Brain System was developed and is used only by the Royal Vision Group, it is not based on any other predefined or existing investment strategy. He starts with explaining they are not a trend or mean-reverse followers, their approach takes on a much more complex mechanism, a unique approach to trading strategies.
Aia, the computer-based system is analysing and recognizing patterns, by leveraging the scope of level 2 data, which are then offered to the professional trader. It is looking at the movements of orders on the market, making SL (Supervised Learning) & UL (Unsupervised Learning) pattern recognition and regularities in data, which are happening when other traders on the live market are going to invest into a certain asset (i.e. futures, stocks, gold, etc.). Whenever there are algorithms entering the market, especially from bigger market participants, they will use a so-called “order algorithm”, which is an automated set of pre-programmed trading instructions accounting for variables such as time, price, and volume to send small slices of order out to the market over time to get into the market or just place their order to buy a security at a certain price. These automated trading systems leave traces on the market because they are using the same or slightly modified parameters for executing a trade. At Royal Vision Group, they have developed a system which is able to identify when those trades are actually happening. Based on that, Aia is able to generate signals with tactical-weighted data, which give a trade direction for the experienced trader to act upon.
Since Aia operates with market data, the Royal Vision Group traders are able to smartly and seamlessly move between a general scope of trading strategies on the quant level, such as mean-reverse or trend following, depending on what the current market activity is doing. Aia is able to cover different types of strategies, that cannot be put into a certain specific strategy box (notoriously known as a black box strategy) as the rest of the quant funds. The main source of the investment ideas comes not from looking on where the trend is going as a typical quant-technical approach (numerical analysis of the trend, setting up parameters from the trend analysis), but rather looking at what is happening at that moment in time, in real-time, on the market where they are trading in. The final execution of the trade is then made by the experienced professional, who offers a human angle with years of experience, screen-time, to assess the importance of a specific trade within the risk parameters. This principle, a combination of a computer and human brain, has shown to be one of the main USPs of the Royal Vision Intelligent Fund’s strategy, which enhances the value-at-risk management model and delivers consistent positive returns.
In order to ensure that uncertainty does not deflect the endeavor from the performance goals, they have created a multi-level and multi-layer safety control to provide the fund with the optimized risk/reward ratio. Their strategy is based on intraday trading where the positions are not affected by the possibility of a radical unpredicted market change or negative overnight news. Additionally, the model is constantly evaluating portfolios based on risk/reward with tactical weighted data supported by automatic predefined stop-loss mechanisms of the total net asset value.
At the top risk level is Aia’s accuracy at predicting the behaviour of the live market, as well as the supervision and execution of each trade by a professional trader.
Although the system can be applied to any market, the Intelligent Fund currently mostly trades on very liquid European index futures, mainly focusing on DAX futures.
The development of the company does not focus only on the trading system. At Royal Vision Group, they also devote their time to having a tailored approach to their business model and investors’ relations. They cater to all types of time investment horizons, so besides offering mid and long-term options, they are also suitable for short-term planned investments by having the option of monthly redemptions without any exit fees. When discussing why they are catering to such a broad spectrum of investment options, Mr. Zadravec responds, they are not focusing on the general public, but exclusively offer their service to individual professional investors, family offices and financial institutions, to which they can then offer flexible investment opportunities with their regulated Intelligent Fund. They are offering pure performance profit sharing, thus displaying their strong belief in the goals of their business.
Mr. Matjaz Zadravec is a firm believer in establishing an innovation lab within the company’s eco-system. Freedom from the constraints of old business structures, hierarchy, and culture is hugely beneficial in accelerating innovation and collaboration with other partners. His statement strongly reflects on the management of business operations of the Intelligent Fund. Looking at Royal Vision Group as a team of professional, they embody the pioneering spirit, encourage diversity and support creativity. The group was created as a sound merger of two outstanding careers in the premier financial services industry and a global family business environment. The founders epitomize exceptional transformational achievements and continuous growth delivered in most volatile market conditions. Almost two decades of business experience in Europe, US, and the Middle East, reflects the DNA and their permanent drive to create new value for their investors. Finding and sustaining an effective competence mix is a key role of a progressive business model. Royal Vision Group uses a unique and competent mix of a small but flexible team of 15 professional minds for trading, data analysis, R'n'D, business development, finance, and investors' relations.
Royal Vision Group is revolutionizing the financial industry with the introduction of the Royal Vision Intelligent Fund. They are one of the upcoming leaders and pioneers of the new era in the financial industry, dedicated to making a difference with the best people, systems, products and services possible.
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