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How Artificial Intelligence Helped iFlip Save Investor Returns During The 2020 Market Crash

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How Artificial Intelligence Helped iFlip Save Investor Returns During The 2020 Market Crash

The markets are historically volatile during the coronavirus pandemic, throwing conventional risk management strategies out the window. 

Demand dissipated as investors and traders reduced risk into the drop. 

The Financial Learning Information Platform, or iFlip, a leading algorithmic intelligence wealth manager, said its trading strategies saved investors 28% in losses in the crash. 

What Is iFip?

iFlip is a wealth management app that leverages mathematics to hedge investors out of the market when the risk of a trade is not worth the reward.

The firm’s investing tools and proprietary trading methods were pioneered by leading Wall Street Trader Kelly Korshak, iFlip’s co-founder, who worked at the CME Group Inc (NASDAQ: CME), CBOT, Tudor Group, Brevan Howard, and Deutsche Bank AG (NYSE: DB).

“Through the use of AI, we are now providing access to long-term investment vehicles that were not available in the past,” Korshak said in a statement to Benzinga in January. 

The platform reduces uncertainty through statistical modeling and AI, helping iFlip’s S&P 500 investors generate returns in excess of 400%, over a 15-year period.* 

AI Pulls Back Before The Crash

In November, iFlip’s algorithmic intelligence removed investors from the market due to the risk of near-term reversion.

“We got out originally in November of 2010,” said Korshak. “The algorithmic intelligence felt that the market was overbought.”

Back then, the coronavirus was not a concern. Instead, regardless of fundamentals, downside risks exceeded the upside reward on a go-forward basis.

“We believe price tells all,” said the iFlip co-founder. “Fundamental information is interpreted instantly by the markets electronically. We know that information is coming out in real-time and we’re able to respond to it in real-time.”

The market had already made a substantial move from its prior lows, and the probability of a reversion to the mean was too great, he said. 

After a small sell-off, the AI re-entered the market in December and defined risk via a dynamic stop.

Navigating The Crash

“The ultimate bottom was 32.3%,” said Korshak. “Literally inside of weeks, ... we lost more S&P 500 points than in the 2008 financial crisis.”

On a non-algorithmic basis, active managers suffered tremendously in the crash, further weighed down by fees and mandates, according to iFlip. 

“The reason mutual funds don’t do well beyond their high fee structures is that they are also subject to mandate,” said Korshak.

“A mutual fund may have a mandate that forces the manager to have 90% of monies invested at any given time to satisfy redemption requests. In passive ETF investments its all-in-all-the-time."

If the market is dropping and a trader takes 90% of the losses, it doesn't do them any favors, he said. 

The iFlip AI did suffer some damage in the crash, giving up close to 5%.

Korshak said he made a note about cross-asset volatility and the old mantra that diversification wins out in a fight against losses.

“We’ve learned this over many occasions over the last 30 years — geographical diversification is meaningless over time as we become a global society,” he said.

“Growing, learning algorithms will always be superior to an actively managed account,” the co-founder said. "Even though the correlation of bond and equity prices is still negative, the diversifying element in term of price offsets will eventually decouple in a sustained low-interest-rate environment."

And Korshak is right: when the U.S. market began its sell-off in February, global assets became increasingly correlated, with emerging markets and commodities taking the dive together.

iFlip's Future 

iFlip is capitalizing on the recent market crash to introduce a recovery portfolio, an average dollar-weighted custom ETF.

The product is composed of stocks such as Exxon Mobil Corporation (NYSE: XOM), AT&T Inc (NYSE: T), Carnival Corp (NYSE: CCL), Bank of America Corp (NYSE: BAC) and Chef’s Warehouse Inc (NASDAQ: CHEF).

"If there’s a recovery, we think that portfolio will double, and if we think mathematically it is more likely to double than to lose half, it is a bet we should look to take," Korshak said. 

If the portfolio were to endure unforeseen volatility, then the AI would leverage its proprietary algorithms to manage risk and hedge out investors, he said.

To learn more about iFlip’s proven trading systems, visit iflipinvest.com.

*Results over 15 years are hypothetical. Past performance is no guarantee of future performance. 

Photo courtesy of iFlip.

 

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