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Hedge fund in Sweden trounces return target with rare AI model
A SWEDISH hedge fund called Volt Capital Management has run circles around its own return target by relying on a form of artificial intelligence it says is unique.
Volt Diversified Alpha Program was created in early 2017 by Jukka Harju, the former head of research at Lynx Asset Management. It only has about US$30 million under management, but this year it has delivered more than double the 10 per cent return target it promised investors. Instead, they have received 24 per cent. In March, when Covid-19 triggered a global selloff across markets, Volt had a positive return of 12 per cent.
Patrik Safvenblad, the fund's chief investment officer, says his models, once plugged into Volt's AI program, helped him position for the slump in oil markets, and for gains in bonds and the dollar. Volt is doing "something that is unique within machine learning", Mr Safvenblad said. "We take the power of fundamental models - we believe in fundamentals, fundamentals matter - we combine that power with machine learning."
Volt has chosen 200 models it thinks will make money. But, "we don't know exactly when and/or how to weight them", he said. "We use machine learning to handle the daily weighting problem."
Volt's investment horizon is relatively short, averaging about 12 trading days. The fund holds roughly 70 positions at any given time. Its analysis shows that the economy will stay weak.
"Basically the systems are positioned for continued economic weakness, with focus on commodities, equity markets still appear too volatile for significant positions," Mr Safvenblad said.
He's short soft commodities and "a bit short equities". Long bets include gold, platinum, fixed income in Europe and the US, as well as the greenback against the Australian and New Zealand dollars. BLOOMBERG