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From Kirsten Bischoff, Opalesque New York: Opalesque recently had the chance to speak with Michael Markov, CEO and Director of Research at the U.S. offices of Markov Processes International (MPI) about the firm’s reverse engineering approach to hedge fund analysis as well as their thoughts on hedge fund replication strategies and some of the new ways they are using their data capabilities to increase transparency to clients within the industry.

One of the tests which elite US Navy SEALs must take to be considered expert marksmen requires them to disassemble and reassemble a variety of weapons. In addition to the physical ability to take apart and put together the tools of their profession, they must name each part as they go, while an instructor times them and asks them various probing questions about each part of the weapon and about its function as a whole.

It is perhaps an apt comparison to the requirements of the team at MPI (a team that includes a former lead software engineer with a specialty in robotics and technical cybernetics who designed robots for Russian military and space programs) which disassemble and reassemble portfolios as part of their analysis of a fund’s return streams. In fact, the team is capable of reverse engineering a portfolio to provide in-depth analysis of a fund even when given less than a year of returns to work with and only the most basic information on a fund’s focus of investing.......................

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