OK. It’s no secret how I feel about Tweeting (see my earlier, and maybe a little too honest, post about being a Twit); it’s a lot of work but it does serve a purpose and I am not the only one that feels this way. Last month, Derwent Capital Markets, a London-based investment firm, launched Europe’s first social media-based hedge fund. Yes, you read that right. Derwent and its founder, Paul Hawtin, are looking at Twitter not only as a tool to increase brand awareness and client relations, but as a means of quantifying the mood and level of calmness of overall tweets made by the general public and using it as an indicator for making market predictions.
While this is a very cool concept, it does raise a lot of questions. For starters, tweets are easily manipulated, so how accurate is the data being analyzed? What Derwent is doing, however, is not analyzing tweets made by marketers about a certain stock or what people are doing with their portfolios, they are analyzing and quantifying human emotion and calculating a general level of “calmness” of tweets by the general public. According to a recent study by Pew Research Center, however, 13 percent of adult Americans on the Internet use Twitter. Out of that 13 percent, 18 percent are users 18-29 years of age, 14 percent are in the 30-49 age range and 6 percent of our 65+ crowd are using the service. The study, however, did not include statistics for the tween and teen years. My guess is that this percentage is higher than the 18-29 age group which means that their investments could include teen girls tweeting about a recent prom dress disaster. What does that say about the market? Perhaps Derwent has created a rule that eliminates accounts of individuals below a certain age, but I don’t see where on Twitter I indicated my age when I signed up.
The statistics by Pew also raise another question. Is analyzing 10% of tweets made by 13% of adult Americans really enough to make accurate conclusions about the market? Derwent apparently thinks so because they are planning on returns of 15 to 20 percent.
Also, what words does Derwent deem anxiety oriented and can they really calculate one’s level of calmness from a 140 character Tweet? What one thinks as a high anxiety situation, might not be interpreted the same way by another. I recently tweeted at a food truck because I was annoyed that I had to wait 45 minutes for my grilled cheese sandwich and then my order was wrong. I’d say for a hungry woman who’s seven months pregnant, that’s a pretty high anxiety situation. When I made that tweet, I certainly didn’t think it had the chance of being analyzed by a hedge fund to determine how the market would fluctuate. According to a recent report in New Scientist, however, after a few days of high levels of anxiety on Twitter, the Dow Jones actually falls. If I tweeted for three straight days about my grilled cheese debacle, would I have negatively affected the Dow Jones average? This brings me back to my original question, what words are categorized as anxiety driven?
But, whatever questions this new, innovative hedge fund raises, there’s no denying that this is a cool concept but, again, I am not the only one that feels this way. Derwent was scheduled to launch this hedge fund in February and then in April, but it didn’t launch until May because they experienced BETTER than expected fundraising to the tune of nearly $100 million US, $60 million more than they were trying to raise. There’s no denying that they’ve piqued the interest of many eager investors. So while this fund has its fair share of skeptics, let’s give them the benefit of the doubt. They could be on to something here.
To keep track of how this new endeavor pans out, you can follow Derwent Capital Markets on Twitter, @DerwentCapital. Funnily enough, however, none of their tweets have reflected anything about their returns to date. To analyze my level of anxiety on a daily basis, you can follow me at @confgirl06.