Fri, Dec 13, 2019
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Artificial intelligence hedge funds outperform the hedge fund benchmark

Monday, September 02, 2019

Laxman Pai, Opalesque Asia:

Hedge funds that use AI-based computer models to help with trading have been outperforming the hedge fund benchmark for the past year, said Preqin Insights.

Based on three-year cumulative returns, Artificial intelligence (AI) hedge funds have outperformed the Preqin All-Strategies Hedge Fund benchmark by a margin of three percentage points, with AI funds returning +26.96% over the past three years and all hedge funds returning +23.87%.

In isolation, this difference does not seem significant enough to give AI funds an edge in the market, but other risk metrics must be taken into account.

According to the report, parsing the three-year volatility and Sharpe ratio data, AI funds have slightly more favorable risk-adjusted parameters than the Preqin All-Strategies Hedge Fund benchmark.

Over a three-year horizon, AI funds have shown 3.20% volatility and a Sharpe ratio of 1.96, while all hedge funds have posted volatility of 3.87% and a Sharpe ratio of 1.40. The greater a portfolio's Sharpe ratio, the better its risk-adjusted-performance.

The higher Sharpe ratio, coupled with the lower volatility over three years, suggests that funds utilizing AI technology have indeed been the better investment over the past three years.

Meanwhile, as AI/machine learning capabilities evolve and become more sophisticated, more hedge funds are using AI trading methods.

The number of AI hedge funds launched in 2018 was up 77% in 2016. ......................

To view our full article Click here

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. 50 South Capital & Preqin highlight emerging manager outperformance in a new report[more]

    Bailey McCann, Opalesque New York for New Managers: New data from Preqin and 50 South Capital, the investment arm of Northern Trust, shows that emerging managers are outperforming established managers by almost 4% a

  2. An academic wrecking ball aims at hedge funds[more]

    From Bloomberg: Quant investing, and indeed much of the hedge fund industry, is built on the power and freedom that come with the ability to sell short. When you short a security (borrow and then sell it, meaning you make money if the price falls and you then re-buy it), you can profit when markets

  3. PE/VC: Private equity buys $101bn of European businesses, 30 under 30 venture capital 2020: Meet the young investors backing tech's next big thing[more]

    Private equity buys $101bn of European businesses From Bloomberg: European equities' cheap valuations have turned the region into a honeypot for private-equity and arbitrage funds looking to reap double-digit returns. With the buyout firms enjoying a massive amount of dry powder, especial

  4. PE/VC: The truth about private equity fund size, US VC investment in female founders hits all-time high[more]

    The truth about private equity fund size From Institutional Investor: As the end of the year approaches, institutional investors in private markets are wrapping up work on the last few funds we need to invest in to hit our targeted annual commitment levels. You see, private equity

  5. Crypto: Almost 70 crypto hedge funds have closed this year as institutional investors shy away, Central bank talk of launching cryptocurrencies is all bluff, Thailand and Hong Kong in crypto collaboration with cross border token project, Crypto loans see solid growth, platforms attract community interest, A Bitcoiner in the Senate? Is Bakkt CEO in US govt. good or bad for crypto?, Bank of France to test digital currency in 2020[more]

    Almost 70 crypto hedge funds have closed this year as institutional investors shy away From The Block Crypto: Nearly 70 crypto-focused hedge funds that largely cater to institutional investors, such as pension funds and family offices, have closed this year. The number of new fund