Vuk Vuković and his team behind the proven successful Bayesian Adjusted Social Network (BASON) method have established a new hedge fund that is set to launch in January 2023. The BASON method, which consistently achieved an annual return of 71 percent in 2022 by accurately predicting weekly market movements, will serve as the foundation for the hedge fund‘s strategy, said Vuk Vuković, co-founder of Oraclum Capital LLC based in New York.
– This has long been my personal goal; however, I wanted a fund that employs a quarterly macro strategy, in the same way I trade for my personal account. In fact, this is closer to wealth management than a hedge fund, Vuković said.
The idea to convert the BASON method into a tradeable strategy came from numerous friends, acquaintances, and followers who were impressed by its performance and suggested it be turned into a fund. After receiving positive feedback and useful suggestions from experts in the financial industry and the investor community, Vuković began the process of registering the fund and fulfilling regulatory requirements.
Individual performance will be linked to the fund’s performance
– Dozens of you, impressed by our performance, contacted us with the suggestion to convert BASON into some kind of fund, even an ETF. We took that advice seriously. During the summer, we made a brief pitch and reached out to many people in the financial industry and the investor community, mainly in the U.S. and London, to see if this idea made any sense at all. A weekly prediction method that consistently beats the markets? A great opportunity, their statement reads.
To their great excitement, the feedback on the hedge fund idea was really excellent.
– We received really useful suggestions on how to organize the whole thing, how to test a bunch of alternative strategies, how to set up the fund structure, automate our trading, etc. Several of these calls ended with new investors. Kudos to them for being bold, Vuković said.
– We apply a weekly trading strategy that limits losses each week (a maximum of five percent of the total portfolio) and allows for profit growth. Most of our annual returns come from a few stellar weeks, where our weekly returns exceed eight percent, Vuković added.
From Oraclum Capital, they expressed gratitude to everyone who participated in their competitive surveys and those who supported the idea from the very beginning, and now the incentives for their users will be even greater.
– First of all, your individual performance will be linked to the fund’s performance! The more money the fund earns for its investors, the more money will be distributed as annual rewards to the best users. We will allocate three percentage points of our annual performance fee of 25 percent, which will be distributed to the top 20 users by the end of each year.
This is in addition to the quarterly rewards (again $5,000), which will also reward the top 20, not just the top ten as it was in the last quarter… Quarterly rewards will grow, as will annual fees. The key is to keep playing, week after week, and continue delivering that ‘wisdom of the crowd’ that BASON knows how to translate into a tradeable market signal, the statement reads.
How the fund structure looks
The hedge fund will follow the same distribution that was presented to investors during the fourth quarter of this year. Half of the portfolio will track their weekly BASON predictions, where ten will be allocated to options with a two-day expiration that are still bought on Wednesdays and closed on Fridays, while 40 percent will be allocated to long/short positions in their main indices (SPY for S&P500, UVXY for VIX, while DIA for Dow will most likely be replaced with QQQ for NASDAQ due to the illiquidity of DIA options). This half of the portfolio is highly liquid, converting to cash every Friday (while recording profit or incurring loss).
The other half of the portfolio will, as stated in the announcement, balance risk and ensure beta neutrality of the portfolio. 40 percent will be designed for macro positioning (macro-based long/short positions in SPY and QQQ, adjusted monthly or quarterly, based on tracking the macro strategy), while the remaining ten percent will be in highly liquid instruments: 2Y U.S. Treasury bonds and cash – as both provide stable but low returns.
– The fund will charge a 1.5 percent entry fee, a 1.5 percent management fee each year, 0 percent exit fee, and a 25 percent performance fee with a cap of eight percent, the statement reads.
