Twitter Hedge Fund Goes Silent

May 29 2012 | 9:06am ET

The world's first Twitter-based hedge fund has tweeted its last—and quietly, at that.

Derwent Capital Markets shut its much-ballyhooed $100 million hedge fund after just one month last year. The London-based firm said its proprietary trading model analysed the use of "calm" words on the social networking system to predict movements in the Dow Jones Industrial Average, with 87.6% accuracy.

But in spite of the hype that surrounded the fund's launch, and its 1.85% return in its only month last summer, one of Derwent's largest investors suggested, perhaps appropriately, that the social network-based trading system would be appropriate for crowd sourcing. So Derwent has changed gears, deciding to offer its trading signals to day traders.

"The information we are using is from the mass market anyway," CEO Paul Hawtin told the Financial Times. "In return, we're saying to these people, 'You can use these signals yourself.'"

The new system will overlay Derwent's Twitter-based measurements on IG Group's spread trading platform. Hawtin said he hopes to get between 3,000 and 5,000 customers, with Derwent paid a portion of IG's fees.

"As a result" of the investor's suggestion, "we made the strategic decision to close the Derwent Absolute Return Fund and invest directly in developing an online trading platform," Hawtin said.

"The problem with hedge funds is that it is a very difficult product to market and there's a very small clientele who can even know about it, let alone use it."


In Depth

Q&A: Open Season For Closed-End Funds

Aug 29 2014 | 10:00am ET

When Maury Fertig and Bob Huffman, former Salomon Brothers coworkers, launched...

Lifestyle

Och Funds Women In Finance Initiative At U-M

Aug 28 2014 | 3:01pm ET

Och-Ziff Capital founder Daniel Och and his wife have made a "generous donation"...

Guest Contributor

Looking Ahead: What’s In Store For Managed Futures?

Aug 22 2014 | 12:52pm ET

The last five years were phenomenal for investors in equity indices. Will the next...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

July/August 2014 Cover

The time was right

Commodities/Futures magazine launched at the precipice of a revolution in the futures industry—really a revolution in the idea of risk management—that would move it from a small niche industry to ...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.