March 22, 2011

Hedge Fund Invests $40 Million on Twitter Mood Tracker

Launch postponed to accommodate investor interest

The Huffington Post reported Tuesday that Derwent Capital Markets, a London-based hedge fund, has invested $40 million to "obtain exclusive rights" to an algorithm that compares the value of the Dow Jones Industrial Average to the "collective mood" of Twitter users.

The Indiana Daily Student initially reported Monday that fund owner Paul Hawtin hired Johan Bollan and Huina Mao, developers of the algorithm, as private consultants. The paper reported that a licensing agreement is pending between the University of Indiana and Derwent Capital Markets.

Bollan and Mao released a paper in October 2010 outlining their model, which uses OpinionFinder and Google-Profile of Mood States to track keywords used to describe moods on Twitter, and compares the results to movements in the index. The developers claim an accuracy of 87.6%.

FINalternatives, an online news services focusing on hedge fund and private equity news, reported in January that plans to launch the fund were delayed until April 1 due to a "surge of investor interest."

"Derwent is ramping up its custodial arrangements and seeking "various investment and advisory services" from several banks before moving forward," the site reported then, noting that the fund has over $40 million committed and has "investor interest of some [$65 million]." 

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