Narranomics

HomeTeamContactPresentation

Please access the presentation on a larger screen.

An investment manager focused on risk narratives.

We believe recurring patterns of language define risk narratives in financial markets.

Our proprietary natural language processing (NLP) models quantify these patterns into narrative trends and reversions.

Using highly liquid financial futures, we pursue equity index plus returns by capturing volatility when it matters most.

Our Investing Process = {Principles, Models, Decisions}

Principles

Our interpretation of narrative economics.

Models

Our models define and quantify recurring patterns of language.

Decisions

Signals identify directional trades and protect capital.

“Narrative economics demonstrates how popular stories change through time to affect economic outcomes.”

Robert Schiller

Nobel Laureate in Economics and author of Irrational Exuberance, Animal Spirits and Narrative Economics

“No one ever made a decision because of a number. They need a story.”

Daniel Kahneman

Nobel Laureate in Economics and author of Thinking Fast, and Slow

History doesn't repeat but human behavior does.

Stories don't repeat but narratives do.

What’s a Risk Narrative?

A Permanent Story in a Model

It’s measurable after being transformed by NLP models.

It’s comparative over time.

It consumes stories, news, events and results.

Where we find Recurring Patterns of Language

Financial Media

Central Bank Communications

Risk Actors

Investors

Central Bankers

Businesses

Consumers

Politicians

Model Building

How We Build Our Models

Step 1:

Language

We maintain a dataset of millions of news articles and financial documents.

How We Build Our Models

Step 2:

Relevance Sorting

We train NLP models to identify relevant documents.

How We Build Our Models

Step 3:

Sentiment Ratings

We train NLP Models to assign sentiment ratings to relevant documents.

How We Build Our Models

Step 4:

Signals

We use quantitative methods to transform our ratings into signals.

Our Models Recognize Patterns

Human Pattern RecognitionEmotional and selective memory of language.

Machine Pattern RecognitionUnbiased memory of recurring language patterns.

Traditional Inputs Are Numeric

Prices, Yields, Indices, Rates, Ratios & Statements

Our Inputs Are Language

Expressions, Semantics, Rhetoric, Framing & Storytelling

What defines and drives a Risk Narrative?

“Economic expectations are inherently social phenomena.”

Richard Curtin

Director Emeritus of the University of Michigan Consumer Sentiment Survey and author of Consumer Expectations: Micro Foundations and Macro Impact

“If you've seen one financial crisis, you’ve seen one financial crisis.”

Kevin Warsh

Federal Reserve Governor from 2006 to 2011

The Narranomics Arc

The Narranomics Fund is a tactical overlay to equity strategies with:

More liquidity & flexibility, and highly accountable
Language pattern recognition for trend-following and reversions in a managed futures strategy

Tactical Trading

Long and Short of highly liquid financial futures
Average position length is 22 days
Long 57.3% | Short 31.3% | Cash 11.3%
Short-term signal drives directional changes and stops

Risk Management

Trading only highly liquid financial futures with global trading hours
Maximum leverage is 1x gross notional | Margin ratio between 5% and 10%
Maximum drawdown is 10% before exiting a position
Signals are systematic, execution is discretionary

Summary of Terms and Conditions

Minimum investment is USD 500k for Accredited Investors with QEP status
Management Fee is 1% per annum, paid in quarterly 0.25% installments
Performance Allocation is 10% of profits above a 5% hurdle rate, annualized, non-cumulative
Monthly liquidity with 30 days notice