Seattle firm debuts ETF that uses machine learning for long-term ...
Euclidean Technologies is bringing its machine learning-fueled stock strategy to the masses.
Founded in 2008, the Seattle firm manages private hedge funds on behalf of accredited or high net worth investors, using machine learning technology to find undervalued U.S. stocks.
Now the company is converting those hedge funds into an ETF (exchange-traded fund) structure, opening its business to retail investors with the launch of the Euclidean Fundamental Value ETF on the New York Stock Exchange.
The move takes Euclidean from a boutique asset manager managing about $136 million to a firm that will serve a much wider array of investors.
Using advanced math and computational techniques to pick stocks is not a new phenomenon. But machine learning is different because it can discover “complex, non-linear relationships in high dimensional data,” said John Alberg, co-founder and managing partner at Euclidean.
“Our research at Euclidean has shown that the application of machine learning to select companies as sound long-term investments can improve on traditional quantitative approaches to equity investing,” he said.
Several years ago, Euclidean started testing “sequence-to-sequence” learning — a technique used for natural language processing tools like ChatGPT — to quantitative investing. It deployed its model in March 2020; since then, its core fund has outperformed S&P 500 total returns by about 3%, as Alberg explains in this blog post.
Now the firm is researching how to use machine learning-based language models to quickly analyze written or spoken language related to company performance — text of SEC filings, earnings transcripts, news articles, analyst reports, and investor presentations.
Euclidean, which makes money off asset management fees, has a small workforce in Seattle and is looking to expand its team.
Alberg and his co-founder Michael Seckler previously started an HR software company called Employease that ADP acquired in 2006.
Alberg is the son of the late Tom Alberg, the Madrona Venture Group co-founder and Seattle tech community leader who passed away last year. “He’s dearly missed and had an outsized impact on my life and career,” Alberg said.