by Martin Oliver
Hedge funds are typically large, low-regulation financial institutions available only to the ultra-rich.
This pattern has been broken with the arrival of the world’s first activist hedge fund, the Robin Hood Minor Asset Management Cooperative. Rather than smoking a cigar on a luxury yacht, its head honchos are more likely to be discussing and creating open source online tools, and describe their activities as ‘hacking finance.’
Headquartered in Finland, and with offices in five European cities, the fund is run by unpaid volunteers with the exception of a single paid employee. It makes use of special share trading software, which after years of testing and tweaking led to the formation of the Robin Hood Coop in 2012. In its first year of trading, it was the world’s third most profitable hedge fund. Another striking point of difference with its peers is that it originated with a group of economics academics whose interests cross over into art, politics, and postmodern thinkers with radical ideas about the role of labour in society.
The trading software, described as a ‘dynamic data mining algorithm’, is known as Parasite. This works by following the most profitable Wall Street traders, and tracking their trading patterns. Where these traders act in unison, it replicates the trade. Based on the thought of contemporary French philosopher Michel Serres, the idea behind Parasite is to latch onto the body of the financial system, suck out private capital, and to divert it into the development of the commons. Once used to describe shared land, today the concept of the commons has expanded to take in open-access cooperative structures.
A new strategy being rolled out is known as Shadow Parasite, and involves locating the worst stocks in the US and then ‘shorting’ them, in other words placing a bet that they will go down.
Assets under management are currently about 700,000 Euros (roughly AUD $1,070,000), and are not constrained by ethical screening. Relatively high-risk and volatile, initially the Robin Hood fund significantly outperformed the S&P 500 Index, but has since fallen behind. Anyone can join online for E60 (AUD $92), which breaks down into of minimum of one E30 share plus an E30 membership fee. At the time of writing however, the online joining facility is down and is about to be relaunched.
Its 919 members have a say in the running of the fund, and choose a split between the share of profits that they keep and what goes back in. Many members choose an equal 50/50 division. To make payments in currencies other than the Euro, one suggestion has been to bypass the banks by using services such as the peer-to-peer international money sending service Transferwise.
An important part of the fund’s operations is its grants, which are directed towards grassroots initiatives that work to maximise their social leverage and have no existing funding streams. In 2015, donations totalling E15,000 (AUD $23,000) were made to three groups:
- Casa Nuvem, a cultural centre working for citizens’ rights in Rio de Janeiro, Brazil.
- P2P Foundation/Catalan Integral Cooperative. A cooperative umbrella group involved in creating alternative producer and consumer initiatives outside the capitalist system.
- Radio Schizoanalytique/The Steki. This Greek radio station is challenging an environmentally damaging gold mining project at Skouries, run by the Canadian company Eldorado Gold, and also promoting alternatives.
Never standing still, the Robin Hood Coop likes to mutate and experiment, and is open to change and reinvention. It is currently in the process of implementing a special crypto-currency (a digital currency using encryption techniques) working with blockchain (a payment handling system pioneered by Bitcoin.) This was developed in partnership with the trading platform HitFin, and would be the first of its kind to be backed by an asset, namely shares. It opens the door to numerous possibilities, detailed on the website, including self-replication in the form of small autonomous Robin Hood initiatives.
Robin Hood Coop www.robinhoodcoop.org