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New German CTA strategy based on Artificial Intelligence delivers uncorrelated returns

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Frankfurt-based Tungsten Capital Management’s Artificial Intelligence CTA programme, which was taken live 12 months ago, has delivered strong returns.

The firm's UCITS CTA Tungsten TRYCON Basic Invest HAIG had previously been managed as a trend follower like most of its peers.
After many years of research, it has left the beaten path that CTAs have traditionally taken and redefined the CTA concept, employing sophisticated statistical methods from the field of Artificial Intelligence.
The new “QuantMatrix” strategy was taken live in September 2013. Since then, the fund has returned 11.9 per cent, with a volatility of only 7.4 per cent. It was profitable in 10 out of 12 months during that period and has ranked eight times among the best of its class in the BarclayHedge database.
Michael Guenther, portfolio manager of the Tungsten TRYCON fund, says: "Our quantitative strategy seeks zero correlation with other asset classes and it only correlates moderately with CTAs. While we want to maintain the merits associated with a CTA investment, we want to avoid being dependent on sustained trends." 
The underlying quant models examine linear and non-linear relationships between a wide range of quantitative measures. Created as a purely alpha driven source of returns, the programme has been built to cope with different market environments and volatility regimes.
QuantMatrix produces short-term predictions on some 25 financial futures markets from equities, fixed income and currencies, exploiting directional trading opportunities. Compared with trend following programs, it is much more dynamic and can much more flexibly adapt to a changing environment, sometimes switching positions within a matter of 24 hours. As a result, the programme has produced several thousand trading decisions during the past 12 months, enhancing the significance of the period's results.
The UCITS fund is structured as a Luxembourg FCP and charges an annual management fee of 1.45 per cent plus 20 per cent performance fee in its institutional share class.  

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