AI-fueled gains of 37% propel German hedge fund strategy

Munich-based Quantumrock announced that its flagship strategy Volatility Special Opportunities Program (VSOP) is on track for its best returns in its four-year history, with gains of 37% for the year-to-date through July. Earlier this year, the $50 million VSOP strategy took in $500 million of institutional capital as returns of the systematic multi-strategy portfolio attracted attention with its artificial intelligence-sourced investments. A UCITS fund based on the strategy is expected to launch in September. With a real-money track record dating back to July 2016, the program is composed of a balanced portfolio consisting of S&P 500 futures and Treasuries with a duration risk of circa five years. It also trades overlay strategies on situational volatility patterns relying on artificial intelligence and machine learning methodologies. In total the portfolio shows a lower risk profile than the S&P 500, officials said. The VIX long strategies reduce the beta to the S&P 500 by hedging the tail risk. “Despite high-frequency data pointing to a halt in the recovery, particularly in the U.S., the S&P 500 gained 5.98% in July,” commented Quantumrock CIO Michael Zellner. “While VSOP’s overlay portfolio lost performance trading long volatility, it gained positive results on long treasury strategies – demonstrating that it is able to successfully seek out opportunities in the market and generate alpha even when markets are performing well.” By comparison, hedge fund indices have reported essentially funds breaking even in July with returns staying essentially flat so far in 2020. For Zellner, being up 37.02% for the year, and by 0.63% in July, is proof that VSOP can deliver encouraging results when markets are relatively calm, as well as during times of volatility.

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