Hedge funds turn to psychology software to revolutionise trading

Last updated: September 15, 2013 8:23 pm

Hedge funds turn to psychology software to revolutionise trading

By David Oakley in London

Were you alone in a small office after a breakfast of muesli or in an open-plan space nursing a hangover when you made that brilliant trade? Some of the world’s leading hedge funds are asking these questions as they turn to psychology to delve into the minds of top fund managers to boost performance and profits. Man Group, the world’s biggest publicly traded hedge fund, is among early adopters of a software program that aims to create the perfect environment to help individual fund managers produce their best trades.Simon Savage, who runs funds for GLG Partners, a division of Man, said: “This is a groundbreaking development, which we hope will give us that extra edge in an industry that is becoming more and more competitive. Sportsmen and women have used these techniques for years to give themselves a competitive advantage and it makes sense to do it in the office as well.”

Mr Savage thinks the technology will revolutionise the way people work and perform, similar to the way diet, psychology and preparation have played a big part in producing the best football teams. Another leading investment group in the US, which does not want to be named, is also taking on the technology.

The software, developed by Clare Flynn Levy, a star fund manager at Morgan Grenfell in the 1990s, allows fund managers to key in a variety of information, from the time a trade was made to the mood the person was in when they made it. Lifestyle factors, such as diet and the amount of exercise a fund manager undertakes, can also be logged.

The technology, to be launched this week, has been developed by Essentia Analytics with the help of psychology and human behaviour experts as well as computer and software specialists. It aims to align performance with skill and as far as possible eradicate luck and chance by working out the circumstances surrounding the best and worst trades. This, in theory, should help fund managers repeat successes and avoid failures.

Ms Flynn Levy said: “Emotions and mood play a big part in performance. I know when I was a fund manager I would have loved to have had access to this technology, which is a sort of checklist for top performance.

“As a fund manager, I used to work over the summer until I realised I was better off taking a break and coming back refreshed and motivated. Everyone is different, so producing the best returns is about knowing yourself and how you perform best. This is what this technology aims to help you do.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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