[It can be argued that professional investors need and deserve better market intelligence. The statistics from the recent SPIVA scorecard demonstrates that the vast majority of mutual funds globally (U.S., Canada, Mexico, Brazil, Chile, Europe, MENA, S. Africa, Japan, and Australia) underperformed their country’s relevant S&P benchmarks over 1, 3, 5, and 7 years – with one solitary exception of Brazil over the recent 1 year period (64.43% of funds outperformed the S&P Brazil Large Cap index).

While many investment managers can counter with structural issues in core country index construction, improper capture of true manager performance due to mutual fund vehicle constraints, and persistent stock leadership concentration (like with AI/tech stocks), this consistent relative underperformance seems to call for a research and investment technology reappraisal.

To explore deeper into this portfolio management performance dilemma, we reached out to Rocco Pellegrinelli, CEO and Founder of Trendrating – an advanced alpha discovery and trend analytics research platform that offers investment managers a risk and opportunity management overlay to any portfolio holdings. He sent me a few research flyers to demonstrate the application of his AI-driven price trend model in capturing significant shifts in price trends with crypto ETFs, software stocks, and precious metals stocks, well before conventional research or traditional methodologies detected the price trend shift. This early warning/opportunity mechanism is crucial where volatility is high, when market disruptions appear, and quick adjustments can make a significant difference in managing both risk and opportunity for investors.

I asked Rocco questions to better understand how his modern InvestTech research platform was designed to address the SPIVA-documented performance gap in mutual funds by validating and capturing price trends across global equity markets. He is convinced, through his research and investment technology development, that AI-driven, systematic, advanced trend analysis will increasingly become an integral part of the future of portfolio management, helping deliver performance that beats conventional and discretionary methodologies.]

Hortz: How is this chronic underperformance, as reported by SPIVA, possible considering all the research, data, analytics, and terminals used by fund managers?

Pellegrinelli: The industry is paying the cost of the status quo. Conventional investment management resources, including research, financial data, and systems are clearly not delivering the value many suppose. The problem is a lack of modern fact-finding with rigorous validation of investment parameters and a heightened respect for trend analysis.

Many investors use a discretionary approach based on assumptions, ideas, opinions, and subjective forecasting, whose actual value in delivering alpha is unclear and unproven. Some investors may dismiss the importance of a sanity check of the theories driving the investment process via a sound historical test across market cycles and monitoring for market and sector trends. Others would be interested in this exercise, but do not have the technology or time needed to execute a sound validation test.

Hortz: What do you see as the solution?

Pellegrinelli: How can people trust the investment decision framework without a wise test and validation of whatever investment research and tools are being used? The solution is using investment technology that enables an advanced discovery process, unveiling factual insights, and price trend capture with a measurable impact on performance.

Compare any selection parameter (fundamental, quantitative, technical) and unveil the rules that perform better. Explore any combination of rules and discover the best mix, as checking more boxes can capture more alpha. Assess and validate the results across the years with a rigorous test over different market cycles in your investment universe. Then systematically monitor market activity and portfolio positions to isolate, verify, and capture major price trend movements.

The quality of information determines the quality of the investment decisions and the performance. Advanced technology can produce factual market intelligence and the measurability that is the basis of successful active portfolio management.

Hortz: Can you give some examples of the insights that can be extracted?

Pellegrinelli: There are several levels of intelligence that can be extracted:

Fundamentals - analyze, compare, and rank any fundamental parameters and discover those that are best rewarded in any investment universe. They may be different across sectors, with some rewarding value and others only growth. Discover the insights that make a difference.

Explore any combination of different rules and parameters - test alternative combinations, optimize, validate, and document with historical evidence and full transparency.

Trend capture - add an element of trend analysis, as portfolio performance is the result of the combined trends of the stocks held. Respecting trends is important to profit from the performance dispersion across stocks by avoiding falling securities and capturing uptrends well before conventional momentum metrics, which is critical for risk management and portfolio performance.

Overall, the key objective of all the above is discovering what works, what is irrelevant, and to document the results. Obviously, a test is not a guarantee for the future, but rejecting a test is a guarantee of uncertain outcomes.

Hortz: What does Trendrating offer?

Pellegrinelli: We offer a unique discovery technology delivering fact-finding and market intelligence with measurable value. The measurability of the actual alpha that can be produced is what makes our solution different. Our 300+ institutional clients find all the above in our platform, including AI-driven analytics and a personalized AI research platform assistant. This is something they tell me they cannot get from the other conventional, popular services and terminals. At least not strategically designed and formatted for easy discovery and price trend capture. We want to offer a new paradigm of measurable value - research, data, and information designed to help investment managers make money. Investors need and deserve better information producing real value.

Our InvestTech “performance management” technology offers a breakthrough in market intelligence and factual insights. We enable investors to discover what works and what does not work, with a platform supporting enlightening fact-finding and rigorous validation via multi-year tests. The impact of this enabled discovery technique and price trend capture on investment performance is fully measurable and trackable in the Trendrating system.

The Institute for Innovation Development is an educational and business development catalyst for growth-oriented financial advisors and financial services firms determined to lead their businesses in an operating environment of accelerating business and cultural change. We operate as a business innovation platform and educational resource with FinTech and Financial Services firm members to openly share their unique perspectives and activities. This interview is for informational purposes only. The goal is to build awareness and stimulate open thought leadership discussions on new or evolving industry approaches and thinking to facilitate next-generation growth, differentiation, and unique client/community engagement strategies. The Institute was launched with the support and foresight of our founding sponsors — Ultimus Fund Solutions, FLX Networks, TIFIN, Advisorpedia, Pershing, Fidelity, Voya Financial, and Charter Financial Publishing (publisher of Financial Advisor and Private Wealth magazines).

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