social capital

Tweet the Market: Hedge Fund That Traded Twitter Sentiment Relaunches for Mass Use

Now you too can follow the money.
Mr. Hawtin. (Screen grab.)

Mr. Hawtin. (Screen grab.)

Remember the so-called Twitter hedge fund, Derwent Capital Markets, which parlayed research indicating that tweeted sentiments tracked well with the Dow Jones Industrial Average to fashion a social-media based trading algorithm?

Derwent closed its doors in May, not because an investment strategy based on the mood of the hive mind was a bad idea, necessarily. (It sounds dumb, but Derwent’s returns on its $40 million funds reportedly outpaced the market.) But rather because founder Paul Hawtin wanted to revamp the idea, making it accessible to the millions of Twitter users who don’t have the kind of cheddar it takes to play ball with a hedge fund.

That dream is now a reality, The Wall Street Journal reports, as Mr. Hatwin is gearing up to launch a trading platform to bring social media market insights to retail investors:

The platform, called DCM Dealer, will offer retail investors the ability to trade equities, foreign exchange and commodity contracts using a real-time sentiment tool based on data produced by Twitter Facebook and other social media channels. The tool will apply a sentiment rating of between 0 and 100 on each asset traded on the platform; 0 will represent a very negative attitude towards the instrument and 100 a very positive sentiment.

Well, bully for him, and bully for you, if this sounds like the kind of way you’d like to invest. If, on the other hand, you’re utterly horrified at the thought that the morons in your Twitter feed might have even the slightest say in managing your money, feel free to stay far away, knowing that you’re probably in decent company.

Follow Patrick Clark on Twitter or via RSS. pclark@observer.com