The hedge of reason
Published 17/08/2010 | 10:51
Rantec Research’s William Kerr talks about the success of the firm’s hedge fund algorithm and its plans for growth.
How long has Rantec been operating in Northern Ireland?
Rantec was founded in 2007 for the sole purpose of commercialising eight years of research into the study of randomness.
Do you have any plans for expansion?
Yes. We're on the tipping point of substantial growth. Our leading algorithm [trading formula for use in hedge funds] has produced market leading returns for more than two years now.
We've also formed strategic relationships with leading financial institutions and we're in the process of developing a world-class research facility. We anticipate trading Rantec algorithms on upwards of £100m assets under management in the near future.
What has been the company's biggest success to date and what has been the hardest lesson it has had to learn?
The two year live validation that our technology works is arguably Rantec's biggest success to date.
In 2009 our EA1 algorithm produced audited returns in excess of 103%. Perhaps the most challenging lesson learned to date has been the realisation that performance is only an aspect of a successful trading business — some 50% of hedge funds fail due to operational reasons. Crucially, the feedback we received from top industry professionals — that money management in financial trading plays a much more significant role than model builders initially assumed — proved invaluable.
Have you launched any new initiatives to combat the challenges of the continued economic downturn?
The continued global downturn has actually benefited Rantec. In difficult times investors typically seek shelter in diverse and safe assets.
Our products offer investors a totally uncorrelated asset in the most liquid market in the world. The interest in Rantec's products has naturally grown rather than shrunk during the ‘credit crunch’.
In a competitive marketplace with plenty of choice for customers, how do you win business?
Through the delivery of unique and exceptional products. Winning business starts with having a winning a product.
By focusing first on product, winning business is a substantially easier process. Our main selling point is that our trading technology is uncorrelated to the general equity markets. Our technology offers investors a true alternative investment strategy. We've also developed several strong relationships over the past few years with major global funds.
Rantec started life in the Northern Ireland Science Park. How beneficial, if at all, was this form of support to the company?
It was crucial in the early stages of start-up. Within weeks of moving into NISP I found myself in front of a selection panel for a 10 month entrepreneur program called The Transform Programme.
It was a fantastic programme with 40 entrepreneurs.
The network of contacts and group knowledge within NISP is also invaluable. The flow of international traffic through the park provides a butterfly effect for your business — one day you can be having a coffee and speaking to one of the ‘dragons’ [from BBC2’s Dragons Den] and the next day a delegate from the White House — the network effect is powerful.
How many people are employed by Rantec? Have those numbers changed in the last few years, and are there any plans to recruit more?
The motto in the hedge fund industry is that small is beautiful and Rantec intends to keep its headcount small.
While some well-known funds manage billions of dollars with just five to six people, Rantec intends to grow to a 10-15 person company in the short-term.
How can you explain in the simplest terms just how Rantec software can predict movements in the currency |markets?
Our automated trading technology is concerned with the motion of daily movement up or down, not the long-term direction of the currency.
The technology identifies specific time periods of significant price movement. In simple terms our losing trades are much smaller than our winning trades.
We are protected on any losing days by a stop limit but on winning days we are unlimited so over a period of time we make a profit.
You've worked in Silicon Valley. What are the chances of Northern Ireland — or the NISP — becoming a mini-Silicon Valley for Ireland?
It's my opinion that both the quantity and quality of funding locally prevents Northern Ireland from becoming a |mini valley.
While we have excellent innovators across the island, the lack of finance available for the high-risk, high-growth segment limits global growth opportunities for Northern Ireland firms.
Certainly some headway has been made at the NISP through NISP CONNECT and HALO, that has just been named Business Angel Network of the year, but it will take more collaboration between industry, academia and government before we can truly cultivate local innovation to its full potential.
Does Rantec have its eye on any new markets?
We're seeing some exciting stuff with our current research — new time periods and instruments provide scalability for our technology e.g. oil and gold.
Do you lie awake at night thinking about the business?
I tend to work at night and get most of my best ideas during this time. I am also remotely connected to a super computer at the office so if I have an idea I can quickly test it.