Israeli Hedge Fund Harnesses Big Data

Jul 28 2014 | 8:10am ET

Apica Green is a multi-million dollar Israeli hedge fund that is based in Tel Aviv and has 360,000 researcher/analysts.

If you're picturing the HR nightmare this would entail, relax: those thousands of researchers and analysts aren't actual employees of the firm, they're people who share their investment tips online. And boy do they share—Apica Green has captured millions of online investment recommendations since 2004, thousands per day, from a wide variety of sources including both financial sites and social media outlets.

The fund, which focuses on equities, ETFs, and options, was founded by brothers Amit and Ido Green with the backing of financiers Gaby Ravid and Daniel Silbiger. The Green brothers, who manage Apica, have been exploring the possibilities of Big Data for some time—Amit led a team that designed and implemented classified network communication technologies and developed real-time network communication analysis systems for the Israeli Defense Forces before serving as a senior advisor in network management and software engineering at Israel's Bank Leumi.

Ido was previously a developer advocate at Google, working  with the firm's business development, product management, marketing and PR teams. He has also launched several successful startups of his own.

The two began gathering data for their trading system in 2004; by 2008 they were operating with real money; and in July 2013, they formally established the Cayman-based fund which, as of June 2014, was up 13%.

Rock Stars

The key to Apica Green's system is not so much the volume of data it captures, which is impressive, but the way it is able to search that pile of data for valuable trading tips.

The software doesn't give equal weight to the advice of all tipsters. Instead, the firm uses proprietary technology to create a detailed score card for each analyst/trader—ranking them by criteria like accuracy, yearly return, average return, industry, etc—which allows it to winnow hundreds of thousands analysts down to 30 “Rock Stars.”

What's interesting about Apica's Rock Stars, Galia Ron, the firm's business development and senior director, told FINalternatives in a recent phone interview, is that since Apica Green began trading with real money in 2008, 70% of the Rock Stars have remained unchanged.

“Not necessarily that they are professional analysts,” said Ron of the Rock Stars. “They're accurate and...they like it and...they put their recommendations out there. People ask us, 'Why would they share their recommendations?' Well, it's exactly why they share what they eat and what they wear, how they're feeling today—people like to share.”

Apica's technology is sophisticated enough to distill a recommendation out of a several-hundred word article or blog post, said Ron. It can also distinguish people who are followers from those who are actually generating ideas.

And the technology doesn't stop with the Rock Stars—Apica also analyzes the companies they recommend, ranking them on fundamental inputs as well as the Rock Star's thumbs up. Each company is given a quality score, helping the fund determine whether (and how much) to invest.

At this point in the process, automated system recommendations are fine-tuned by human analysis: macro sector allocation, micro stock fundamentals and risk analysis.

Apica, which has a capacity to run $600 million, is currently fundraising, with roadshows in Europe and the U.S.

The fund's auditors are Ernst & Young, the administrator is Orangefield, the prime broker Interactive Brokers and legal counsel is Fischer Behar Chen.

Apica Green's minimum investment is $1 million, fees are 2% and 20% and liquidity is quarterly after a one-year lockup.


In Depth

Q&A: George Schultze On His Fund's Unique Approach to Distressed Investing

Apr 16 2015 | 1:01am ET

George Schultze is a managing member of Schultze Asset Management, a long/short...

Lifestyle

Puerto Rico Woos The Rich But So Far Gains Little

Apr 17 2015 | 2:45am ET

Hedge fund manager Rob Rill grins. He has just had word that U.S. financial regulators...

Guest Contributor

Minnesota Supreme Court Rejects The Ponzi Scheme Presumption: Lenders Claw Back Some Of Their Own Rights

Apr 17 2015 | 9:23am ET

A recent court ruling in Minnesota has put an end to the Ponzi Scheme Presumption...

 

Editor's Note