Case

The Best Alternative to a Crystal Ball

Global Evolution is a very successful capital investor. The company invests in government bonds and foreign currencies in emerging markets where the risk is relatively high. The business model relies on sharp predictions, and to substantiate these, Global Evolution uses algorithms which analyze a large set of very different variables and provide detailed and nuanced answers to where it's attractive to invest.

about Global evolution

Founded in 2007, Global Evolution specializes in government bonds and currencies in emerging markets. The company manages approx. DKK 60 billion on behalf of the world's largest pension companies and private investors. The company has 40 employees in Kolding (DK), Zurich (CH), and New York (US).

challenge

How do you build a solid business upon predictions of risk-intensive investments in emerging markets, which is the common denominator for widely different developing countries? Countries that on the one hand are experiencing great economic, political and demographic development, and on the other hand, may also experience political and economic instability?

Global Evolution has done that. The company manages DKK 60 billion on behalf of the world's largest pension funds and private investors around the world.

"The most important thing for our clients is that they get the best risk-adjusted return on their investments as possible. Therefore, our most important task is to predict as accurately as possible. We need to be razor-sharp when assessing which countries' government bonds and currencies we should invest in – and how much. The risk is higher in these markets, but reversely it's also possible to achieve a relatively high return," says Ole Jørgensen, Director of Research, Global Evolution.

Ole Jørgensen, Director of Research, Global Evolution.

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Nationally and probably internationally, Rooftop Analytics is one of the leaders in customized statistical analysis models.

SOLUTION

Advanced forecasting model. Several factors affect the economies of emerging markets. Economic activities can be simple factors whereas Trump's tweets and the outcome of Brexit are more complex factors. In collaboration with Rooftop Analytics, Global Evolution has developed a special forecasting model to create a very nuanced and substantiated picture of where the money is best invested.

"We feed an algorithm with many different variables and get answers in return on, e.g., which countries would be most beneficial to invest in. Based on the algorithm's recommendations, we have become sharper and more founded on the significance of using empirical evidence. We learn new things and make more right decisions than we would have otherwise. The algorithm often surprises us and shows correlations that are new to us," he says.

Most recently, the forecasting model has been expanded with the inclusion of artificial intelligence. The model is trained to - in real time - to provide the probability of a currency being weakened or strengthened over a given period of time.

"With artificial intelligence, we can improve our knowledge and insight and continue to create good results for customers. We can't get algorithms and artificial intelligence to do all the work for us. But in our world, the forecasting model is the best alternative to a crystal ball," says Ole Jørgensen.

Result

There are no similar solutions in our field. Rooftop Analytics and Global Evolution have together developed an artificial intelligence algorithm to forecast exchange rates for more than 25 currencies, and in the long term for all currencies relevant to emerging markets including the euro and the US dollar.

"Nationally and probably internationally Rooftop Analytics is one of the leaders in customized statistical analysis models. There are no similar solutions in our field. We experience a great deal of interest and enthusiasm from our customers because it gives a professional boost to the calculation methods, while at the same time the predictions most often hold water. For us, it's important to be the best, and in that perspective, Rooftop Analytics is an essential partner," he says.

THE STRENGTH LIES IN THE PERSONAL MEETING

To hear more about how companies establish algorithm-based decision-making, contact Kristian Lindholm Nicolaisen.