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Legends4Legends Amsterdam September 2017

Hedge fund managers & allocators opine on markets and fees

EVENT REVIEW

The second annual Legends4Legends conference was organised by industry charity Alternatives 4 Children (A4C), of which Adamas Asset Management COO, Marc de Kloe, is a co-founder, in cooperation with local hedge fund allocator, Theta Capital, where partner and portfolio manager, Ruud Smets, was heavily involved. A4C’s project selection criteria include sustainability (in both economic and ecological senses); local anchoring; independence, to foster longer term self-sufficiency; and transparency. The 2017 event raised EUR 100,000. A4C’s projects have included funding schools and educational projects in Ghana, Tanzania, Kenya, India and the Netherlands. Theta Capital’s Euronext-listed multi-manager offering, the Legends Fund, and their bespoke managed account capabilities, were profiled in Issue 118 of The Hedge Fund Journal.

Here we highlight views from those that spoke on the record.

Systematic and quantitative

Systematica’s Leda Braga: Artificial intelligence, big data and alternative risk premia “Every new day more new data gets recorded – 5 billion terabytes – than was recorded from the birth of the world up until 2003,” says Systematica CEO, Leda Braga, who featured in The Hedge Fund Journal’s 2013 and 2015 ‘50 Leading Women in Hedge Funds’ surveys, in association with EY. Braga sees parallels between autonomous cars and autonomous investment processes: “Both use machine learning which needs enormous data sets, and multiple parameters, neural networks and multiple regressions to capture data complexity.” However, “the sparse and noisy nature of financial data makes it more difficult to infer an investment thesis.” To address these challenges, Systematica spends millions each year on data and is fortunate in having a large team of data scientists whose enthusiasm is demonstrated by attending the office for a hackathon challenge on a sunny Saturday. “We also train our staff incessantly in cybersecurity,” she adds.

Geneva-headquartered Systematica, which has granted exclusive interviews to The Hedge Fund Journal in 2015 and 2016, is “a white box not a black box,” says Braga. In practice, this means the firm is transparent in articulating its approach, but does not publish its code. One example of a tradable signal is that large share price moves backed by institutional investors are more persistent than those driven by retail investors. But turning this idea into an actionable model entails collecting, cleaning and filtering vast amounts of data from multiple sources. Another useful finding is that “natural language processing (NLP) techniques can cluster companies into sector groupings that have better predictive power than traditional GICS sector definitions,” says Braga. One example – classifying Facebook partly as a media company rather than simply a technology company – seems very logical, given its advertising revenues. However, “the alpha from this signal is already decaying, so a richer model will be needed in future,” foresees Braga.

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Informing the Hedge Fund Community. With access to some of the industry’s biggest names and an astute and talented group of writers and contributors, The Hedge Fund Journal has established itself as a trusted source of information on the hedge fund industry.
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