NaviFI’s machine learning platform allows smaller investors to enter the US Treasury bonds market, which is extremely closed off, with only a handful of large financial institutions able to access it
US Treasury bonds are a relatively safe investment because they are backed by the federal government, making them good instruments to diversify a portfolio. However, investing in US Treasuries is exclusive and is inaccessible to most businesses or retail investors.
Financial technology company NaviFI describes this situation as a “walled garden”, because only a select group of the largest financial institutions, such as major hedge funds, can freely trade in US Treasuries. NaviFi, co-founded by CEO Dr. Baruch Gliksberg together with CBO Omri Margalit and CTO Ben Bloom, recognized that while smaller investors can purchase directly from the government, there is no easy way for them to sell these bonds, making them difficult to liquidate. Investors are prevented from enjoying the benefits of liquidity and volatility, which are how they make money. NaviFI has made it its mission to change this reality.
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As an alternative, investors can turn to exchange-traded funds (ETFs), which are stocks that mimic the performance of US Treasuries. However, conventional ETFs can severely underperform, and the prevailing economic uncertainty and rising interest rates have led to growing interest in fixed-income opportunities.
According to NaviFI, investing in FI markets is difficult due to the extremely high barrier, where the required technology and quantitative analysis capabilities are out of reach for non-specialized funds. The entrenched value chain of the market is segmented into interdealer and dealer-to-client markets. Interdealer players enjoy high liquidity and tight spread, which are not available to those outside of the market. Furthermore, there is no central exchange market for fixed-income securities, further exacerbating market inefficiencies and incompleteness.
Omri Margalit, co-founder alongside Baruch Gliksberg, and chief business officer of NaviFI, says that the walled-up nature of fixed-income securities is counter-intuitive, as US treasuries are far more liquid than stocks, with an immense daily volume of trades. “US Treasury bonds trade at around $600 billion to $700 billion, daily” Margalit says, “Representing the most liquid market in the world and a fertile ground for trading and investing”.
“The blood flow of the economy is reserved for an exclusive club of big financial institutions that participate in the existing market structure. While ETFs may seem like a good option, investors often end up getting the short end of the stick, seeing lower returns while paying major funds for the privilege of having US Treasury investments and managing it for them. Essentially, they’re paying for the privilege of being liquid,” Margalit says.
NaviFI says that its goal is to harness hedge fund-grade technology to democratize investing and trading in US Treasuries, transforming it from a walled garden into a playground, where fixed-income is accessible to everyone.
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NaviFI’s platform allows all investors to access US Treasuries, flinging the gates to the market wide open. NaviFI’s platform is based on the cutting edge proprietary technology developed by its parent company, Navigate Ltd, which was founded in 2015 by Dr. Baruch Gliksberg. The platform allows its users to effectively invest in US Treasuries, achieving superior returns to any widely available equivalent. Dr. Baruch Gliksberg has been working on NaviFi’s platform for more than 6 years, investing a huge amount of resources into R&D. He has created the machine learning technology that allows the platform to reflexively respond to market changes, without the need for human intervention.
Margalit says that while NaviFI has hedge fund-level technology, it does not aim to build a hedge fund around it, as it goes against the company’s mission to improve the financial well-being of everyone.
Moving forward, NaviFI is planning to launch various products based on its machine learning technology. Initially, it will target businesses that want to manage their cash holdings by investing it in US Treasuries. This will be followed by a product for retail investors, which will create unprecedented entry levels in the US Treasuries market, allowing investments as low as a few hundred dollars.
“Our purpose is to increase inclusivity in fixed income markets, not just serve a handful of individuals or financial institutions that can invest as limited partners. Opening a hedge fund runs counter to that mission. We are mission driven, what makes us special is that we do not want to be in an exclusive club. We want to create a market that has more people playing in it.”
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