Trendrating Enabling The Evolution of Equity Portfolio Management

The financial services industry has been permanently changed by technology. Gone are the days in which customers had to drive to their local banks to make transactions or manually balance their checkbooks. Fintech has made managing finances simple, with access to all kinds of accounts just a click away. In such Trendrating is addressing the customer needs in 2020 and has culminated into one of the most sought-after Financial Technology Solution Providers of 2020.

We spoke to Rocco Pellegrinelli, Founder & CEO on how Trendrating is revolutionizing the industry:

“The future of active management is here. Trendrating solutions are changing the game of asset management.– Rocco Pellegrinelli

What are the challenges faced by Trendrating customers, & how are you addressing the same with your unique solutions?

The active management of equity portfolios and funds has been facing increasing challenges over the past 10 years. According to statistics, 88% of all domestic stock fund managers underperform the broad S&P Composite 1500 Index over that period (S&P SPIVA Report). The biggest contributing factor to this underperformance is an over reliance on “old school” approaches and methodologies. Asset management and wealth management must deliver more value to end clients, increase efficiency, satisfy increased compliance and drive down costs in the face of dropping fees. Only state of art technology and intelligent advanced analytics can handle this game-changing challenges.

Walk us through a quick snapshot of the conception of Trendrating.

Trendrating is the result of strong passion and a dream to develop the best trend capture model for medium to long term equity investors. Our team has over 25 years of experience in building first class analytics and models. The starting point was a simple question, “why do so many active managers underperform their benchmarks?” And our answer was, “because they are not equipped to capture trends across securities. Assessing and respecting the actual price trends, irrespective of biases and opinions, is the key to deliver superior returns on a consistent basis. If one does not get the trends right how can they deliver outperformance?” So we had a vision – developing a methodology to measure the true direction and quality of medium-to-long term price trends, as a mission -critical complement to the decision process. After years of massive testing of thousands of models across 20 years of data for 15,000 listed securities we framed a model that satisfied our metrics across different market cycles. The output of our sophisticated algorithm is transformed into something easily actionable and intuitive. Our model offers a unique proprietary rating of trends where the ratings A and B indicate a bull trend and C and D mark bear moves. We provide a unique edge where A and B rated stocks on average outperform those rated C and D. Our range of products includes The Trendrating “Performance Management Platform”, “Advanced Analytics Data Feed” and “Systematic Management Solution”, which was recently released to clients. The Trendrating solutions are a powerful complement to the existing analytical process of active equity portfolio managers. As of today we serve hundreds of portfolio managers worldwide and we have premier partners including Bloomberg and Euronext.

How are you offering additional intelligence and measurable value to the existing decision processes?

Superior performance and more effective risk control on a consistent basis are possible only with a good synchronization with price trends. Trends are impacted by several factors which includes 24×7 global news, macro-economic factors, geopolitical events and social media. This means that, fundamentals are only a small part of the picture. Generating superior and sustainable performance in this difficult environment brings a particular challenge to active managers who mostly rely on “old school” Fundamental or Technical Analysis. The only solution is the adoption of model driven, robustly tested and proven, alternative data and advanced analytics. Trendrating focus is to provide the best analytics and technology to assess and measure the true direction and the quality of medium-term price trends irrespective of price noise, volatility, opinions and biases.

What are your differentiating factors?

The strategy of Trendrating to beat competitors is based on hard facts. Trendrating promise is to generate alpha in a measurable, actionable and repeatable way. The increase in terms of potential performance that Trendrating can generate is fully measurable and trackable on the fly using Trendrating technology. Trendrating is setting a new paradigm of value for money, delivering transparent, proven added value to any active investment strategy. Several other companies claim they can add alpha, but how many can prove it and how? The Systematic Management Solution of Trendrating makes possible to create, test, optimize and execute investment strategies and track in real time the performance that can be produced.

As organizations are working to respond to the COVID-19 situation, how is Trendrating handling the crisis from an investment intelligence perspective?

Covid-19 was a shock to equity markets, experiencing increased volatility and faster rotation of money flows. Fast adjustments to rapidly changing fundamentals are here to stay and the dispersion of returns will continue to be extreme and unprecedented. In this market it is mission critical to be able to intelligently read price trends and actively manage opportunities and risks, this is what Trendrating does best and our tools are proving to be critical for active managers that understand that the Market is now different.

Can you discuss your unique methodologies and techniques to deliver these solutions and services?

Some of our customers asked for a way to create, test and execute active strategies using our rating methodology. Starting from the investment universe of choice as well as from a list of stocks that satisfy whatever criteria defined by the investor, the idea was to facilitate a more effective selection of the holdings, more in synch with actual trends development. So we developed the Systematic Management Solution a combination of our proprietary rating methodology coupled with our advanced testing and management platform. By applying the Trendrating Systematic Management Solution, one can create a systematic process that can enhance the existing investment decision process. Our Trend Capture Model effectively discriminates between positive trends (A and B rated securities) and negative trends (C and D rated stocks) over a six to 18-month time horizon, delivering strong alpha capture and improving risk control. In summary, The Trendrating Systematic Management Solution can also facilitate the creation and the management of innovative equity products, at low cost – eliminating high fees and long development time.

Could you discuss a few case studies with us to give a clear picture of your expertise?

Sure, here are a few examples: First, there is a U.S. investment advisor group that likes to build up investment portfolios of a list of stocks that they are following. They are in control of the list, but they understand that capturing trends is quite complicated, so they use our price trend system on a monthly basis to re-adjust their positions. As well, when they want to propose to a new client a portfolio of 20 stocks out of hundreds they are following, it is very quick and easy to use Trendrating to select which stocks are in strongest trend positions right at that moment that best satisfy their portfolio management methodology and criteria. Second, another example we have, is a Zurich-based mutual fund company that have just started to launch specific mutual funds based on a fully systematic approach. They are putting these new funds in competition with internal managers with the goal of finding a way to merge the two.

Could you give us an industry overview?

We are in the middle of a Darwinian evolution of the asset management and wealth management industries. Innovative Wealth tech companies like Trendrating developed mission critical technology and content that can facilitate this evolution toward higher standards of quality, efficiency and control. Some players in the asset management and wealth management industries are still too reliant on old school methodologies, theories and processes, in the coming years, their existence might be at risk. Other players fully understand the new challenges and are open to test and adopt innovative tools and new intelligent data, chances are that those players return out to be the big winners. As Steve Jobs said: Innovation is the only way to win.

Where do you see Trendrating in the near future?

Trendrating solutions are the real game changer for anyone involved in active management of equity portfolios. Our products are well validated by sophisticated customers and premier distribution partners. We only serve the professional community and our plans are primarily focused on growing our execution bandwidth expanding into more countries.

Source: Industry Tech Outlook – Insight on Emerging Technology – “Top 10 FinTech Solution Providers to Watch in 2020”– VOL 02-04 – October 2020

Discover More about Industry Tech Outlook

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