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LOIM adds ‘earnings-surprises’ quant strategy to hedge fund offering

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Lombard Odier Investment Managers (LOIM) has launched a new DataEdge fund, a market-neutral alternatives strategy that combines big data analysis and systematic investment expertise to identify trends in consumer behaviour and their impact on company earnings forecasts.

According to a press statement, LOIM’s DataEdge is “an equity market neutral strategy with a differentiated investment framework that uncovers alpha potential by applying an ‘information edge’ to stock picking”.

The strategy launched three years ago and is now opening for the first time to external investors and in a UCITS format.

The strategy relies on the analysis of alternative data points across multiple geographies, sectors and sources, including credit card transactions, digital receipts, web traffic, activity on apps and geolocation services. This data is structured and filtered to identify consumer behaviour trends in real time.

Systematic and quantitative analysis methods are then applied to predict how patterns could impact the key performance indicators (KPIs) of listed companies, such as sales, revenues and new customers, as well as to track inflection points in the trends of KPIs over several quarters. LOIM says that this ‘information edge’ improves the forecasting of company results, to better predict earnings surprises and capture alpha potential.

The investment universe is currently US centric, and predominantly focuses on small to mid-cap companies across consumer, technology, industrial and healthcare sectors. The strategy monitors almost 700 companies daily to create a contrarian and diversified portfolio of 200-250 active stocks, where we see strong potential for divergence between company results and market expectations, therefore generating alpha potential.

The DataEdge strategy is managed by Co-Lead Portfolio Managers, Laurent Joué and Marc Pellaud, who have a combined 36 years of experience in systematic alternatives strategies. Laurent and Marc work closely with LOIM’s quantitative investment team of 21 professionals, which together manages more than $10bn.

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