Steve Chen, YouTube Co-founder, in partnership with Jack Fu, veteran money manager, launched a hedge fund that could pick stocks and fix-income assets by using artificial intelligence (AI).

Chen has also said that the Draco Capital Macro Quant Fund has already raised USD 50 million with a goal of USD 200 million by the end of 2021. With its first launch in September, the fund uses an AI algorithm to track which assets are ideal for both bull and bear markets, Chen added.

“It utilizes much of the AI and big data processing that was employed in companies that I’ve worked and/or advised in Silicon Valley,” Chen says. “It weighs the large tech companies, such as Apple and Microsoft, in a bullish market, while focusing more on defensive assets, such as gold and long-term treasuries, in a bearish market.”

Chen has also talked about the fund’s “systematic investment” process that adds accuracy to decision-making. Chen explains it as mixing economic analysis and investment logic with computer algorithms to build AI-driven decision-making models, reducing downside risk. He further added, “(The fund) replaces subjective trading based on human judgment with systematization.”

After meeting his fund partner last year, Chen found that Fu used big data effectively to manage investments. “This triggered my motivation to apply my professional background in the financial field,” Chen says.

Both the firms now work together on the Delaware-registered fund as Draco Capital Partners’ co-owners, which Fu initiated in 2015. They form the fund’s top two investors.

As a career investment management professional, Fu is now based in Taiwan and has also headed hedge funds before. Today he is a lead for the group of analysts, data scientists, and computer engineers.

“We’re able to predict the market with our own leading indicators and adjust our holdings accordingly,” Fu says.