Yaron Golgher, Co Founder and CEO at I Know First
Can you tell me about I Know First? At I Know First we truly bring science and math to the financial world by providing daily investment forecasts based on an advanced self-learning algorithm. Our R&D team, led by CTO Lipa Roitman (Ph.D. from the Weizmann Institute of Science) has decades of experience in the artificial intelligence field and researching the nature of chaotic systems. The capital market is a very complex and continuously evolving system and I Know First’s forecasting algorithm utilizes artificial intelligence and machine learning techniques to find relationships and patterns in large sets of historical stock market data in order to analyze and predict its behavior. Predictions are generated daily for a growing universe of over 3000 securities, including stocks, world indices, ETFs, interest rates and more for the short, medium and long-term horizons. The algorithm is applied to discover the best investment opportunities and used as a decision support system for existing investment processes or to develop systematic trading strategies. Why did you decide to found I Know First? To focus on the capital markets was a natural choice for us. Market participants are overwhelmed by huge amounts of data that need to be digested and understood to be able to navigate through all kinds of market environments successfully. So far only the largest players in the industry with enough resources and know-how could develop and maintain this type of models internally. With our algorithmic AI-based forecasting solutions it became possible also for smaller or non-specialized institutions in this area as well as for individual investors to benefit from this technology. This was our biggest motivation when founding the company. Who are your target customers? Our clients are very diverse. On the institutional side, our typical customers are family offices, hedge funds, and other asset management firms as well as banks. But we also serve individual investors across the globe. In order to generally better understand how we are able to target and attract such a wide range of clients, I’d like to explain you quickly the solutions offered. The system is a stock forecasting and ranking algorithm and the final product is offered in three tiers. The first two tiers comprise our algorithmic forecasting research product. Tier 1 is usually used by private investors, whereby they can subscribe to the best investment opportunities as discovered by I Know First’s self-learning algorithm. They can choose from many standardized packages as e.g. Top10 Technology or Healthcare Stocks or world indices forecasts. A subscription to such package helps them to identify interesting opportunities in a specific investment universe on a daily basis. Tier 2 solution builds upon the first tier, whereby the forecast is customized to the clients’ needs. The product is used by research and analyst teams in hedge funds, banks, and family offices or by financial advisors. Since the system is scalable, additional securities and markets (exchanges) can be incorporated and various assets filtering criteria applied (exchanges, liquidity and risk parameters, industries, fundamental key metrics’ constraints etc.) in order to meet the clients’ needs. So, in the case of a bank, let’s say its analysts follow closely 100 companies from the S&P 100 index when they give recommendations to their clients. They would receive the corresponding forecasts from I Know First for these stocks and use it as a decision support system when consulting their clients. Another example of a client using this service is a wealth management company, which focuses on income generating equity portfolios, invests in MLPs and also implements sector rotation strategies (via ETFs). Around 200 additional securities were integrated into I Know First’s system in order to provide the client with corresponding forecasts. Approximately once a month the custom prediction universe is adjusted to the changing portfolio and needs of the client. Besides the algorithmic forecasting reports, I Know First develops back-tests and offers systematic trading strategies which are used in partnerships with hedge funds and other asset managing entities. These strategies are rules-based and utilize our algorithmic forecasting indicators in order to rank and select the trades as well as the time the execution. This is our Tier 3 offering and here the final product is the trades recommendations for execution, depending on the investment strategy profile chosen. The type of strategies varies, including mean-reversion logic and more trend focused approaches, all generating high positive alpha while keeping beta in the 0.3-0.8 range, and yielding overall high risk-adjusted returns. The strategies can be used in partnership with I Know First to launch hedge funds, mutual funds or other investment vehicles. What’s your revenue model? The first two tiers are priced fixed per month. The prices can range between $159 and $7,500 depending on the subscription level and the customization (or none) needed. The Tier 3 solution instead is offered on a revenue sharing model, meaning we agree with partners on splitting the management and performance fees. Who are your competitors and why customers use your solution versus your competitors? Obviously, our competitors are any kind of companies providing predictive analytical tools for the financial markets but also various stock rating providers. But we see ourselves in a unique position for two reasons. Firstly, our innovative, independent and objective AI-based approach, separates I Know First’s solution from traditional forecasting models and tools, which was developed and tested decades before the incorporation. Secondly, the two-fold business model puts I Know First in a unique position: offering custom and standardized algorithmic forecasts to a variety of clients (institutional and retail) and researching and developing systematic trading strategies for fund management purposes on a revenue sharing basis. The business model proved itself and I Know First has earned clients’ trust for over four years now and is partnering with large financial institutions not only in Israel (asset manager) but also Europe (bank), United States (wealth management) and Japan (financial information provider). Institutional, as well as individual investors and financial advisers, are looking for advanced technologies that not just help them to make investment decisions or recommendations with more confidence but also offer a different perspective on the financial markets. This is whatI Know First is offering to its customers. First of all, self-learning and adaptability separate our predictive system from traditional models. The financial market is a very complex system that continuously evolves beyond established theories and thus can’t be sufficiently explained and predicted by traditional statistical/econometric models. Traditional models rely on those theories and assumptions behind them, which in reality often don’t hold (anymore). Therefore, a more complex self-learning system is needed in order to model the financial markets and adapt to the changes it continuously goes through.I Know First’s algorithm, incorporating multi-layered neural networks, allows to model the market without human derived assumptions and to keep the model flexible. It applies artificial intelligence and machine learning techniques to search for patterns in large sets of historical stock market data to generate ranked forecasts. I Know First’s system does not only use the most updated information; it also learns from and evolves with it. It adapts to new conditions and features and has enough learning experience and intelligence to be able to make predictions in circumstances not observed before. The algorithm is constantly proposing “theories”, testing them on years of market data, then validating them on the most recent data, which prevents it over-fitting. If a data input does not improve the model, it is “rejected” and another input can be substituted. This bootstrapping system is self-learning and thus live. The resulting formula is constantly evolving, as new daily data is added and a better machine-proposed “theory” is found. Furthermore, when applying traditional tools often too much subjectivity from the user is found in the assumptions. I Know First algorithmic forecasting technology offers a unique objective, adaptable and self-learning advisory system that is built without any human-derived assumptions and doesn’t include any subjective qualitative features. Moreover, the algorithmic forecasts are updated and ranked daily, helping advisors and/or investors make decisions based on the most recent market events, which are often not incorporated by many rating system providers. Also, our unique predictability indicator helps to identify and focus on more predictable assets and thus enhance the overall performance. I could go on and on with all the advantages the technology offers! And I haven’t even touched the ease of scalability of the system that allows us to integrate additional markets/exchanges, enter new markets and create new business opportunities! Do you have partners and how do they contribute to the growth of I Know First? Currently, we are very busy with entering new markets, especially Europe and East Asia. We work together with a large European bank on a special offering to their private banking division. The goal is to develop trading ideas generating tool for their high-net-worth clients. Here, of course, the local capital market is very important. So, we are about to add Euronext to our offering. The London Stock Exchange is next. In Asia, especially Japan, South Korea and China are the most interesting markets for us. There we have several local partners with whom we plan to start marketing campaigns and offering I Know First’s solutions there in 2017. Is there anything else you’d like to add? Just a big shout-out to all investment management professionals and algorithmic trading fans out there – we’re coming to your local market soon if we aren’t there already.