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‘Unique’ AI pays off for Swedish hedge fund

Source: Business Day as of 01-06-2020

A Swedish hedge fund called Volt Capital Management has run circles around return target by relying on a form of artificial intelligence (AI) 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. under management, but year it has delivered more than double the 10% return target it promised It has about $30m investors. its own this Instead, they have received 24%. In March, when Covid-19 triggered a global sell-off across markets, Volt had a positive return of 12%.

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”, Safvenblad said. “We take the power of fundamental models — fundamentals matter — we combine that power with we believe in fundamentals, machine learning.” He says the model addresses two problems.

“If you trade based on fundamentals, you have a problem to choose from your models. If you do machine learning based on technical signals, you risk ending up with socalled false positives.” Instead, Volt has chosen 200 models it says will make money. But “we don’t know exactly when and how to weight them”, Safvenblad said. “We use machine learning to handle the daily weighting problem.”

Volt’s investment horizon is short, averaging about 12 trading days. The fund holds about 70 positions at any given time. Its analysis shows that the economy will remain weak. “Basically the systems are positioned for continued economic weakness, with focus on 12% was the positive return Volt raked in for March commodities; equity markets still appear too volatile for significant positions,” Safvenblad said. He is short soft commodities and “a bit short equities”. Long bets include gold, platinum, and fixed income Europe and the US. “The market is always right,” Safvenblad said. “We don’t think we know better than the market. So when something goes against us, we decrease exposure to those positions, models and sectors. We simply close positions that don’t work.” in 24% is how much investors have received this year, more than double the 10% promised

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