Derwent Capital Markets of London was so enthralled with recent research suggesting that Tweets could be used as a market sentiment indicator to predict the stock market that it set up a hedge fund test the idea.

We noted on FierceFinanceIT that the fund purchased exclusive rights to the model, which was created by two professors at Indiana University.

Now, the firm has formally launched a small hedge fund dedicated to putting this idea into practice, reports The Atlantic. The fund has only been open to investors for a few days, so it's hard to gauge demand. But the firm is aiming for about $40 million. The firm is said to be "targeting an annual return of 15 percent to 20 percent for its investors," notes the magazine.

To many people, this will seem like the height of folly, as most shy from investing in such a faddish manner. The fund isn't saying much about the details of its algorithm, but here's a look at the academic work behind the fund.

It will be fun to watch this unfold. If it works, it might take the whole idea of machine readable news to a whole new level and make social media-driven indicators de rigueur for other hedge funds. If it fails, well, it wouldn't be terribly surprising.

For more:
- read the article

Related Articles:
Hedge fund bets on Twitter-based algo   
Twitter a good idea for CEOs?