MIT Startup Flyberry Capital Emerges with Big-Data Hedge Fund

8/29/12Follow @gthuang

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Hedge funds in general haven’t performed well in recent years. Investors are wary of new financial strategies. And any firm can say it has some black-box system that can predict the market. Barakat, an MIT Sloan School grad and entrepreneur, shuns the black-box approach, saying Flyberry only uses trading strategies that it understands. “At the end of the day, it’s all about your returns and how successful you are,” he says. “People don’t have to take our word on this. They can see our trade results.”

So far, things are looking good. Flyberry has advanced to the finals of a hedge fund competition this summer sponsored by Lion’s Path Capital. (The other finalist is SLCM Capital, a New York startup.) In doing so, Flyberry is likely to secure $1 million in trading funds, and has shown gross returns of 6 percent over the month-long competition. (The company has been doing real trades since April but, for legal reasons, is unable to broadly disclose its trade results. “Believe me, we would like to,” says Barakat.) The winner of the final round could receive $25 million to work with down the road, at which point Lion’s Path would take an equity stake.

Flyberry currently has eight full-time employees and has raised about $500,000 in angel funding. The startup has some themes in common with other tech companies like Recorded Future (Web analytics and predictions), Fina Technologies (data-based trading algorithms), Quant5 (analytics for marketing), Lexalytics (text analysis), and Bluefin Labs (social media around TV).

So how big could Flyberry get? Chang is pretty bullish on the opportunity, not surprisingly. He expects the company will have more than $100 million under management within about a year, and over $1 billion within five years. Those are big numbers. He also wants to establish a big brand presence in Asia.

To get there, of course, the Flyberry team will have to adjust its trading models if they’re not working, and continue to develop new models to stay ahead of the curve. And it will probably need to find new revenue streams. But that’s where the firm’s multiple-model approach should pay off, says Barakat.

Still, he admits, “nobody knows what’s going to happen in the future…but we like our odds.”

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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  • K Bryan

    It sounds interesting. Probably the only big data related hedge fund in these days doesn’t mention using twitter.