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Machine-Learning Hedge Fund Voleon Group Returns 7% in 2019

Justina Lee and Melissa Karsh

(Bloomberg) -- Voleon Group, one of the best known machine-learning hedge funds, returned 7% last year in its flagship strategy after drawing inflows on the back of a stellar performance in 2018.

The Berkeley, California-based firm now oversees $6.5 billion overall compared with $5.1 billion in mid-2019, according to people familiar with the matter who asked not to be identified because the information is private.

Voleon’s Investors Fund gained 14% in 2018, when many of its competitors were hit by the global market tumult that saw the S&P 500 Index drop 6.2%.

The group is one of the few systematic players to have built a reputation on strategies run exclusively by artificial intelligence. While proponents say machine-learning can detect multifaceted links between economic forces and security prices, most quants are still struggling to apply the technology to complex financial markets.

The 2019 return compares with a 9.2% gain for hedge funds overall, according to the Bloomberg All Hedge Fund Index. A Eurekahedge gauge tracking funds using AI and machine learning rose 6.4% last year.

A Voleon representative declined to comment.

The firm, which was founded in 2007, is run by managers with academic credentials. Chief Executive Officer Michael Kharitonov has a computer science Ph.D. from Stanford. Chief Investment Officer Jon McAuliffe teaches statistics at the University of California, Berkeley and helped build recommendation systems at Amazon.com Inc., according to the firm’s website. Both worked at D.E. Shaw before co-founding the AI shop.

To contact the reporters on this story: Justina Lee in London at jlee1489@bloomberg.net;Melissa Karsh in New York at mkarsh@bloomberg.net

To contact the editors responsible for this story: Sam Potter at spotter33@bloomberg.net, Sid Verma, Yakob Peterseil

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