Retraining
The 48 models per market add up to over 2,800 models, which produce a new trading signal each day. “All models are regularly reviewed and updated and retrained rather like smart phone version updates, automatically incorporating new data and market conditions. Older models can be upgraded or replaced. Permanent research is one of the core tasks and therefore new models for example based on new or improved AI algorithms can be added and expand the range of sub-models, if no existing models are simultaneously removed. The process of updating or replacing models is executed very cautiously to avoid substantially altering the character of the entire system in a single update cycle and ensuring a continuous evolution instead,” says Günther.
In an indirect way AI also contributes to risk management. All models focus their AI power on calculating probabilities of market moves. It is therefore also their task to avoid being on the wrong side of the market with their positioning.
Apart from that, risk management is systematically coded in the proprietary software and does not use AI. “It defines risk budgets per market per day and ensures that the AI signals are embedded in a strict, proven risk management framework which cannot be overruled by the AI,” says Günther. The risk management process includes volatility adjustments, volatility shocks and risk cluster analysis.
Liquid investment universe
The investment universe has steadily expanded from about 45 to 60 liquid markets in equity indices, bonds, currencies and volatility. Tungsten TRYCON keep a close eye on liquidity and might remove markets if trading volumes fall below an optimal level or if the risk profile changes.
There have also been some deletions such as the Russian Rouble and short-term interest rates (STIRS) during the ZIRP period.
Bond collateral and 2022
The fund already has some rates exposure through its unencumbered collateral. In common with most CTAs this is a cash rich strategy that benefits from higher interest rates. Cash is invested in core European government bonds issued by Germany, Austria, France, KfW, the EU and others. Cash held in bond collateral incurred some mark to market losses of 4.1% in 2022, which have been recovered as the bonds matured. Investors analysing the trading strategy may want to handicap 2022 returns to allow for this, adding back the bond losses to identify the trading return. As of April 2025, the cash return is just over 2% per year.
Expanding investor base
The investor base has been mainly drawn from the DACH countries – Germany, Austria and Switzerland – as well as Liechtenstein and Luxembourg. Both funds shall soon obtain approval for distribution in the UK and can register elsewhere in response to interest.
Plenty of capacity
The Tungsten TRYCON strategy funds contain EUR 600 million of assets. The fastest models viewed in isolation have lower capacity but given that the short-term model signals are netted off against other signals, capacity is larger than otherwise. Capacity is estimated at EUR 3 billion based on what other short-term traders manage. This is probably conservative since trading timeframes of days to weeks are at the longer end of the spectrum for the “short-term trading” universe where some strategies trade intraday or even intra-second.
