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Market gossip is to take on a more high-tech form thanks to a new automated system that will trawl through more than 40m internet sources – from blogs to regulatory filings – on behalf of hedge funds.
Due for an official launch early next year, the platform is being run by a former Deutsche Bank executive and has received financing from, among others, Draper Fisher Jurvetson, the venture capital firm that backed Skype before it was sold to Ebay for $4.1bn last year. Ten hedge funds are trying out the system.
Called Monitor110, the platform acts as an aggregator and a filter for hedge funds trying to keep up with the explosion of information sources on the internet, such as blogs. The blog search engine Technorati currently tracks 50m blogs, with about 175,000 new ones created every day.
Scott Lessing, chief operating officer for investment research at Citigroup, suggested that the service could help analysts who currently track blogs “only to the extent that it provides an idea which the analyst can independently verify”.
“It’s important to know that the smoke is out there and that others see it,” he said. “There may be more information value in online trends in the aggregate: 5,000 more web mentions of a product than the week before could be an important signal for an analyst covering the product’s manufacturer.”
The Monitor110 platform is one of several initiatives aimed at investors who are turning to the internet to capture market “chatter”. Several companies, for example, scour the internet for data on consumer prices.
Another example is internet search company Yahoo, which last week enhanced its finance site with a blog that compiles postings from portfolio managers, hedge fund managers and other finance professionals. Yahoo is making the change to help counter Google, which has links to blogs on its Google Finance website.
Monitor110 can search for individual pieces of data and trends in online activity. Users are able to filter the data by defining particular companies or investment themes they are interested in watching or by setting “tolerance levels” that would screen sources by reputation.
Roger Ehrenberg, the former head of Deutsche Bank’s fund of hedge funds who is president and chief operating officer at Monitor110, said: “The platform is similar to the data portals that investors are used to, but the difference is that it tickers the unstructured universe.”
Mr Ehrenberg said the platform in time could lend itself to trading strategies dependent on computer-driven models feeding off measures of online activity. However, analysts expressed fears that these strategies could be vulnerable to spammers.