Stockholm (HedgeNordic) – Two years after launching its pure-play machine learning strategy, Constellation, as a standalone offering, Lynx Asset Management has decided to take Lynx Constellation off the market for new investors to manage and develop the strategy further. Brummer Multi-Strategy, the multi-strategy fund that invests in the hedge funds under the umbrella of Brummer & Partners, redeemed its 1.2 percent allocation to Lynx Constellation to increase the allocation to Lynx Asset Management’s flagship trend-following strategy.
“Following a relatively challenging performance period for Lynx Constellation dating back to the outbreak of COVID-19, we have decided to stop marketing the program.”
“Following a relatively challenging performance period for Lynx Constellation dating back to the outbreak of COVID-19, we have decided to stop marketing the program,” writes Lynx Asset Management in a note to investors. After edging up 0.6 percent over the entire 2020, the Lynx Constellation had considerably more difficulty in the first eight months of this year. “When constructing Lynx Constellation, we wanted to create something truly different,” writes the note. “Not only did we aspire to have a low correlation to traditional markets, but also to trend-following and other investment strategies. The models that we utilized were innovative and opportunistic – designed to learn from experience and constantly adapt to the market regime.”
Lynx Asset Management introduced its first machine learning model in the Lynx Program in 2011 and implemented over a dozen more before the launch of Lynx Constellation in October of 2019. “These models had contributed strong returns to the flagship for many years. While the models had no explicit directional bias, they would periodically build directional positions in different asset classes or maintain similar exposure to trend-following models,” explains the note to investors. “To account for – and minimize – this potential correlation, we decided to introduce penalties in the portfolio optimization process. Ultimately, this decision proved very costly during the recent period.”
“We are exploring many promising innovations that could not only improve Lynx Constellation, but also benefit the flagship Lynx Program.”
“We have addressed some of the shortcomings in the portfolio construction process and are exploring many promising innovations that could not only improve Lynx Constellation, but also benefit the flagship Lynx Program,” writes Lynx Asset Management. “However, while we remain committed to Lynx Constellation and will be increasing the internal capital invested, we will wait until all changes have been made before again accepting new outside investors.”
