Hedge fund in Sweden trounces return goal with rare AI model

OSLO • A Swedish hedge fund called Volt Capital Management AB has run circles around its own return target by relying on a form of artificial intelligence (AI) it said is unique.

Volt Diversified Alpha Programme was created in early 2017 by Jukka Harju, the former head of research at Lynx Asset Management AB. It only has about US$30 million (RM129.4 million) under management, but this year it’s delivered more than double the 10% return target it promised investors. Instead, they’ve 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 CIO, said his models, once plugged into Volt’s AI programme, 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 in an interview. “We take the power of fundamental models — we believe in fundamentals, fundamentals matter — we combine that power with machine learning.”

He said 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 so-called false positives.”

Instead, Volt has chosen 200 models it thinks will make money. But, “we don’t know exactly when, or how to weight them,” Safvenblad said. “We use machine learning to handle the daily weighting problem.”

Some of the hedge fund industry’s biggest names experienced deep setbacks in March, including firms run by Ray Dalio, Michael Hintze and Adam Levinson, Bloomberg News reported in April.

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. Bloomberg