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Technology A Quant, Two Data Guys and a Brevan Howard-Linked AI Hedge Fund

17:00  13 november  2019
17:00  13 november  2019 Source:   bloomberg.com

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Data provider Preqin Ltd. tracks 305 AI hedge funds overseeing a total of billion, according to an Aug. 30 note. Kvasir started trading its main fund in August. Its clout has been enhanced after advising industry giant Brevan Howard Asset Management this year on an AI allocation.

Brevan Howard ( Brevan Howard Asset Management LLP) is a European hedge fund management company based in Jersey with its funds domiciled in the Cayman islands.

(Bloomberg) -- The first question Mike Merritt-Holmes gets asked when pitching his AI strategy is about his resume: which hedge fund did he work for? But Kvasir Technologies Ltd. doesn’t come from an established corner of finance. And neither does the man touting it.

Merritt-Holmes founded the machine-learning fund with two fellow computer scientists who made their mark in the world of big data at analytics firm Teradata Corp. The trio subsequently harnessed their engineering acumen to power machine-learning stock investing in developed markets, financed by their personal savings.

Before they crossed paths, only one had professional market experience. Emboldened by their trading successes, the team now expects to oversee around $135 million by December.

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Brevan ’s fund has now roughly halved in size in just two years, according to letters to investors. LONDON—Investors pulled more than billion from Brevan Howard in the second half of 2016, the latest sign they are growing tired of lackluster performance by the hedge - fund industry.

Two of Europe's leading macro hedge fund investors are backing a machine learning data analytics firm that aims to give traders an edge in picking Alan Howard , founder of Brevan Howard , and Jens-Peter Stein, founder of Stone Milliner, took part in the latest funding round for analytics firm Quant

Kvasir is among a cohort riding a wave of interest in artificial intelligence to uncover new investing riches -- empowering computer nerds and data wizards to take on seasoned money managers on Wall Street.

An AI hedge fund index has lagged in the past three years© Bloomberg An AI hedge fund index has lagged in the past three years

“People are really keen to see fresh new thinking and fresh new teams that aren’t coming from a regurgitated reinvention of previous funds,” said chief operating officer Merritt-Holmes from his WeWork offices in London.

Machine learning in finance is a broad term for techniques ranging from complex statistical analysis to parsing reams of text. It’s increasingly where the action is. Data provider Preqin Ltd. tracks 305 AI hedge funds overseeing a total of $17 billion, according to an Aug. 30 note.

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Brevan Howard Asset Management, the hedge fund manager run by billionaire Alan Howard , has shrunk the size of its London headquarters, cutting back on space previously used as a gym, kitchen, meeting area and private reception, two people with knowledge of the downsizing said.

Brevan Howard Asset Management plans to launch a new hedge fund betting on shifting monetary policy, two sources familiar with the matter said, as The new funds follow strong performance gains in 2018 at Brevan Howard after the firm was plagued by poor returns and investors pulling cash in

The technology has plenty of skeptics citing noisy security prices, with the underperformance of a Eurekahedge AI index underscoring the challenge of using machines in practice.

That’s not stopping the tech crowd. U.S.-based AI hedge fund FORA Capital, for example, is led by entrepreneur Stanislav Shalunov, who’s worked at BitTorrent and the firm behind the FireChat app. Software engineers have a prominent presence at Walnut Investments, an AI fund in Paris, which counts trading-technology expert Manoj Narang among its advisers, according to its website.

Before Kvasir, Merritt-Holmes established a data startup that was eventually sold to Teradata Corp. Co-founder Mads Ingwar has a Ph.D. in machine learning, and CIO Martin Oberhuber is a former quant at high-frequency trading firm RGM Advisors.

Kvasir started trading its main fund in August. Its clout has been enhanced after advising industry giant Brevan Howard Asset Management this year on an AI allocation. The hedge fund declined to comment.

The AI Doubts Run Deep as Quants Spar Over the Future in London

  The AI Doubts Run Deep as Quants Spar Over the Future in London Addressing about 400 aficionados of quant investing, a seasoned hedge-fund adviser asked if anyone in the crowd had seen practical uses for AI that will be recognized as the real deal over the next decade. “I got my eyes on both of you,” Stuart MacDonald of Bride Valley Partners quipped when just two people raised their hands.He was hosting a panel in London on the future of systematic finance at a time when more and more traders attempt to harness artificial intelligence to power rules-based strategies.

A growing exodus from hedge funds extended to two of the biggest names in the industry Tuesday, Tudor Investment Corp. and Brevan Howard , as disenchanted investors The funds ’ problem is clear: They just aren’t performing. Hedge funds and actively managed mutual funds have been

Brevan Howard is now the largest hedge fund manager in Europe, surpassing Man which was last year’s biggest manager and is this year’s.. Brevan Howard , which was founded by Alan Howard in 2002, has eleven different funds under management which also include two UCITS compliant funds .

Billionaire Alan Howard has long harbored an interest in the technology and has previously invested in AI firms.

No Autopilot

Kvasir’s founders call theirs an end-to-end approach, using automated programs to process data, construct portfolios and control risk. But they emphasize it’s not a robot spitting out trading signals on autopilot. “We usually always start out with an economic intuition and we design the framework of the signal,” said Oberhuber. “Then we let the machine-learning algo do its own thing.”

The firm, currently a team of just five, is authorized by regulators through G10 Capital Ltd. which provides services to fledgling funds. Kvasir owes its moniker to an omniscient creature in Norse mythology who travels to spread knowledge -- but ends up killed.

“Let’s hope that doesn’t happen,” said Merritt-Holmes.

--With assistance from Nishant Kumar.

To contact the reporter on this story: Justina Lee in London at jlee1489@bloomberg.net

To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net, Sid Verma

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.

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