California-based manager launches long/short equity hedge fund with unique algorithm

Matthew Rossi

SJL Capital LLC, an investment advisory firm based in California, has launched its maiden fund, the SJL MarketDNA Hedge Fund LP. The fund, which began trading on 15th May, employs a US equity long/short strategy with a proprietary quant algorithm called MarketDNA.

Matthew Rossi, the portfolio manager and the managing partner of SJL Capital, told Opalesque he created the algorithm 20 years ago, and it took him 10 years to get it to provide the results he wanted.

In 2006, when he saw the MarketDNA algorithm was accurate, he created an independent investment research company, SJL Capital, and sold the algorithm to other hedge funds. After ten years of doing that, he decided to run a hedge fund himself, using his very own product. So SJL Capital was relaunched this year as a registered investment advisory firm.

There are still some funds using the algorithm, but, "I wouldn't call them "competitors" because what we use the algorithm for encompasses all the equity picks," he says. "The guys that purchased it from me were sector-specific, such as healthcare or technology."

"The whole process is about 90% software-driven and 10% analysis, the part to the algorithm that requires minimal work," he expains. "So it's a hybrid-type algo. The manual part is real-time, looking at real-time data that spits out from the end of day trading information that the algo uses in the prior day. We use it for trading. It produces the picks from the trades that we put on for the hedge fund."

"The algorithm is the most unique product that there is out there," he notes. "Think of it as the CSI TV shows, it is forensics, where they can take trace evidence and determine what happened. It's the same premise.......................

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This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.