When the 2023 World Cup Champion of Futures Trading sets up a regional headquarters for his company in Dubai, people in the investment industry are bound to sit up and take notice. They expect him to bring to the region the same investment strategy and risk management approach that earned him his title. And that’s exactly what Ivan Scherman, CEO and CIO of Emerge Funds Investments, intends to do.
“We started as an algorithmic trading hedge fund and have used a scientific approach from the very beginning – that is using data science to buy and sell assets that we trade,” explains Scherman. “When we started out in 2007, this approach to investment wasn't very well known. But I don't feel comfortable making subjective assumptions regarding investments. I need to have the probabilities of occurrence for whatever we do in order to contemplate how much we can make and, more importantly, to know the risks we face.”
From data science and artificial intelligence to traditional statistics, Emerge Funds Investments employs various methods to identify behavioural patterns repeated over decades and decades and determine their probabilities of occurrence as well as the risk. “This way you will have the data that shows the historical risk of your method of investment, and you can do something about it based on data and facts,” he says.
This strategy of looking for behavioural patterns in different assets it trades, validating them scientifically through a quantitative approach, and adding them to the investment portfolio has been key to Emerge Funds Investments’ consistent performance. Over the years, it has fine-tuned this quant-based approach by using the latest technology and advanced mathematical models to include about 200 systems or patterns to the portfolio. “For 17 years, we have been using these patterns to profit from the market in a very consistent way and have been delivering a 23 per cent yearly key results net for the client," he explains. "Adding these patterns that are not correlated makes our approach sophisticated and diversified in terms of growing our clients' equity accounts smoothly while containing the risks of each of the systems/patterns that is traded because each risk is compensated by the performance of the rest of the systems that are traded inside the portfolio.”
Time and again, this approach has worked for the company. He recalls the 2020 crash in the stock market when the S&P 500 fell 38 per cent and crude oil prices dropped to negative.
“At that time, we were long in S&P 500 and shorting crude oil,” he explains. “That allowed us to earn 3 per cent in the whole quarter when most of the industry lost 40 per cent on average. We finished the quarter positively. That was a consequence of using this approach in terms of diversification, understood as trying to take advantages of opportunities that you can find in all the financial markets, not only the stock market. And to be a real market agnostic hedge fund.”
It’s the same approach that catapulted Scherman to the top of the table at last year’s World Cup Championship for Futures Trading. Even though he took risks during the championship that he would never dare to at Emerge Funds, he was focused on winning the title with a smooth and consistent equity curve that showed a good risk-reward relationship, a measure of any investment. He closed the 2023 championship with a performance of 491 per cent and total drawdowns of 26 per cent.
“Our approach works not only because we are trying to profit from the different assets that we are trading but because we are compensating the drawdowns of each other,” he explains. “That's what made me win the championship and that's why Emerge Funds performed 80 per cent in 2023 – that would be a net of 40 per cent for the client, net of any fees or any charges.”
No wonder many family offices in Dubai have already reached out to Emerge Funds Investments. Its track record of 23 per cent – while most hedge funds around the world struggled to exceed 10-15 per cent over the past 15 years – makes it an attractive proposition for clients.
“The word of mouth for us is pretty strong,” says Bhavya Gehlot, CEO – Middle East and India, Emerge Funds Investments. “We didn't have to knock on the door in the beginning. The opportunities came to us because of Ivan’s spectacular achievements on the trading platform.”
However, Gehlot knows that she has her work cut out. "The biggest challenge for a hedge fund company is increased competition,” she says. “In 2022 itself, there was a 54 per cent surge in hedge fund companies in DIFC. We have nearly 500 companies. And the market is a small niche one. I would say we have five bankers to every client. So the competition is intense.”
With Dubai attracting a lot of high-net-worth and ultra-high-net-worth individuals from around the world over the past decades, on top of the wealth it has been traditionally holding, there is an appetite for alternative investments. Add to that the prevailing high-interest rate environment, and the prospect for hedge funds looks promising. Emerge Funds Investments is well positioned to help clients tap into this opportunity.
“We have kept the entry ticket for our exchange-traded note listed on the Vienna Stock Exchange very attractive for institutional and individual clients so that they don't get overwhelmed and shy away from the thought of investing in hedge funds,” explains Gehlot, “because we want to give them an opportunity to test our niche products.”
Key differentiators
Emerge Funds Investments has further differentiated itself by putting in place a smooth and easy process for accessing and investing in its products. “Unlike other hedge funds where it's a bit of a tedious work to open an account, invest your money and generate returns, with Emerge Funds, it's very easy for the clients to open a broker account and directly access the structured product, which generates returns,” says Gehlot. “Also, we do not have any lock-in period. If the client wants to withdraw their money, they can as opposed to the standard practice in the industry.”
Furthermore, Emerge Funds Investments doesn’t charge a management fee like most hedge fund companies regardless of whether their product has performed or not. It levies only a performance fee. “We charge the markets,” explains Gehlot. “If we make profit on the client's money, then we keep a portion of the performance. That way it's not burdening the client.”
As the company sets up its base in Dubai, with an eye on expanding further into GCC and India, it is also looking at building strategic partnerships with different key players in the industry such as asset managers, bankers and brokers to make the journey smooth for its clients.
“We bring to Dubai a proven hedge fund solution that fits the people of Dubai,” reiterates Scherman. “It's a very profitable solution where I control the risk in the portfolio the same way I controlled the risk in the competition. This way, people in Dubai can have an umbrella against the volatility of different markets – the real estate market, the industrial markets. If something goes wrong, they have this umbrella to protect them and keep growing. Because we control the risks we face.”
For an in-depth exploration of Emerge Funds Investments, including its investment strategies, array of products, and historical performance data, visit www.emergefunds.ae
Additionally, you can track the performance of its 17-year-old fund, which was listed on the Vienna Stock Exchange in 2023, by searching for the ISIN XS2564083413 at www.wienerborse.at
