Twitter-Based Hedge Fund Debuts With $100 Million

May 18 2011 | 11:35am ET

Derwent Capital Markets, which uses Twitter feeds to help determine its investments, has finally launched after a series of delays.

The fund debuted on Monday with US$100 million, London-based Derwent said. The fund was originally supposed to launch in February, and then again in April, but was delayed both times by greater-than-expected investor interest.

Derwent will use a proprietary trading model that analyzes the use of "calm" words on Twitter to predict movements in the Dow Jones Industrial Average. The fund will invest in liquid equities and equity indices; Derwent has previously claimed that its model is 87.6% accurate.

The firm said it is targeting returns of between 15% and 20%.

"For years, investors have widely accepted that financial markets are driven by fear and greed, but we're never before had the technology or data to be able to quantify human emotion," firm founder and fund manager Paul Hawtin said. "This is the fourth dimension."

Dale Gabbert, of law firm Reed Smith, which advised Derwent on the launch, added, "social media is not just changing the way we live, it is now also changing the way we invest."


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