Roundtable: (Big) data, AI to create next generation of systematic investment strategies, but human market 'interference' still a challenge

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The Massachusetts Pension Retirement Investment Management (MassPRIM) has mandated Paris-based NewAlpha to identify newer managers and build a global emerging hedge fund managers program. Also apart from this mandate, NewAlpha sees a growing demand for differentiated and creative investment managers, more for quantitative strategies than for traditional, discretionary strategies. At the same time, interest for risk premia strategies seems slowing down, particularly from large European allocators like insurance companies for two distinct reasons (page 6).

This Roundtable also discusses the advances in artificial intelligence, machine learning and alternative data. Machine learning is presented as an exoskeleton that is very powerful to supplement people with some experience in the market in their decision making. The deeper challenge is however that markets are driven by people, and as they're driven by people, there are very few laws of nature. Prices in the market do not correspond to some sort of systematic measurement in physics but rather to the aggregate view of individuals.

In this context, information and data on their own may not be fully interesting, but how the information is absorbed and understood by market participants is what matters. The human brain of people shifting attention from one area to another creates additional complexity which interferes with prediction models. Still, some believe that (big) data combined with AI will lead us to the next generation of systematic investment strategies (page 11).

The Opalesque 2018 France Roundtable, sponsored by Eurex, took place in Paris with:

Vanessa Casano, Deputy Head Asset Management Regulation Division, Autorité des Marchés Financiers (AMF)
Arnaud de Servigny, Founding Partner, Bramham Gardens
Christophe Roehri, Deputy CEO, TOBAM
Nicolas Gaussel, Founding Partner & CEO, Metori Capital Management
Nicolas von Kageneck, Senior Vice President, Eurex/Deutsche Börse Group
Philippe Paquet, Managing Partner, NewAlpha Asset Management.
Thanh-Long Huynh, CEO, HTL Capital Management

The group also discussed:

Can you design Alpha-creating strategies with machine learning? (page 8). The role of leverage for real creation (page 9). Is there risk of crowding in machine learning based strategies as both algos and data input are generally not that different? Why is simplification important for AI based trading systems? (page 10). Examples of alpha decay in AI based strategies (page 12). How to assess alternative data (page 12). Why have AI systems improved after researchers removed the need to learn from humans (page 14)
Strategy design and evaluation: Why good performances on a 2-3 years dataset are close to meaningless from a statistical perspective (page 13)
Under the premise of admitting our inability to forecast as a starting point, how can we still invest? (page 13)
What could happen if you look at the price of assets as a piece of music? (page 14-15)
What concerns regulators about the increased proportion of passive asset management? (page 16, 18). How do regulators research and deal with closet trackers? (page 17). What is the French regulator AMF's approach to ICOs and cryptocurrencies? (page 17-18)
Green finance products: From label to reality (page 18, 19, 21)
The diversity of the French investment management landscape. New pan-European Pension Product (PEPP) to offer opportunities for asset managers (page 20)
How Eurex offers cost reductions in terms of collateral management through significant margin offsets between exchange traded derivatives. Eurex new total return future and EnLight (page 21)
Why do many risk-premium products disappoint after launch? (page 22)

A discussion of supervisory convergence within the EU (page 22-23)

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Wed, 03 May 2017

Opalesque Roundtable Series - France 2017

Roundtable: (Big) data, AI to create next generation of systematic investment strategies, but human market 'interference' still a challenge

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