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Alternative Market Briefing

Do AI-backed strategies work over the long term?

Wednesday, July 11, 2018

Bailey McCann, Opalesque New York:

With the rise of artificial intelligence (AI), more funds than ever before are claiming to have some type of AI-backed component to their strategy. But can they all really make money using AI over the long-term? Delegates at the recent Opalesque France Roundtable say yes, but only if managers are willing to make adjustments as markets change.

"The first thing that we need to bear in mind is that in finance, markets are driven by people, and as they're driven by people, there are very few laws of nature," says Arnaud de Servigny, Founding Partner of Bramham Gardens. "When you try to run money with fixed rules, sometimes it work, and after a while, it doesn't work anymore. And so, we believe the approach is to be more modest and admit that if we want to run money, it is very difficult to establish a set of rules that is static."

Braham Gardens creates investment strategies and studies the potential of artificial intelligence in investing. De Servigny contends that it is necessary for AI-powered strategies to have a little dynamism in the investment rules. "The most attractive set of features in artificial intelligence or in machine learning is actually directed at helping the system to adapt to changing environments. So that as soon as there is something that deviates or is no more representative of the overall condition in the market, then the approach is changing as a consequence. This is why having this more nimble, more a......................

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