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Algorithmic Hedge Fund Trading


Hedge funds are proactively managed investment portfolios. Their managers use complex forecasting strategies and systems and invest monies in leveraged and derivative positions as well as going long and selling short in the underlying security.  They are vehicles that are the province of institutional investors and high net worth individuals. Unregulated, they are free to dabble in stocks (both short and long), bonds, derivatives, private equity and pretty much anything that looks like it can return a handsome return to the fund participants.

Hedge funds are intended to "hedge against" adverse price movement and / or minimize risk. Hedge funds started off as investment vehicles to be used to maintain at least some profitability during bear markets, but they have evolved into highly complex strategic players that are sometimes riskier than normal stock traders and mutual funds.

In the legal sense, hedge funds are typically established as collective investment schemes. Only a limited number of investors may put in money, and typically they must put in large initial investments to open their account with the fund. Due to the fact that these funds may not always be liquid, investors may leave their money with the fund for a minimum time of one year. However, hedge funds have far more trading options available to them than typical mutual funds, which add to their potential profitability as well as their greater degree of risk.

Clearly, algorithmic trading platforms can be a great help to the hedge fund manager.  They use sophisticated software programs to guide investors and even place orders for them according to a pre-programmed analysis of buy or sell signals.

Algorithmic hedge fund software seeks to enable the manager to buy or sell just the right asset at just the right moment in just the right amount without disturbing the market price too much. This is very important help for the trader given the complexity and potential illiquidity of the instruments and strategies these fund managers employ in a normal day. 

Algorithmic computer models are designed to calculate the factors affecting an investment and trigger automatic trades in or out depending upon which factors merge and when. It is all automated and little action is required from the hedge fund managers when the correct signal is sent.

Successful algorithmic hedge fund platforms need to utilise good service providers that are technologically sophisticated too.  We at The Kyte Group have made significant investments in infrastructure to facilitate low latency, high frequency trading. Our remote hosting suite with careful attention to cabling, air-conditioning and powerage, safely houses state-of-the-art server hardware.  State-of-the-art trading machines are also offered at a significant discount to list price. We host this kit in our purpose-built data centres in London, Paris, Frankfurt, and Chicago.



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