New Managers December 2017

BULLETIN: Australian hedge fund veterans launch cryptocurrency fund, 70% of new hedge funds to use computer models, including AI and machine learning versus 47% in 2015, A&P Emerging Manager Index

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70% of new hedge funds to use computer models, including AI and machine learning versus 47% in 2015

The Deloitte Center for Financial Services has published its 2018 Investment Management Outlook focusing on the big challenges in the year ahead for hedge funds, mutual funds and private equity firms.

Deloitte makes some predictions in there, including this one: With the exponential rise in data availability, and continued increases in processing power, 70 percent of new hedge fund launching globally in 2018 will include investment processes supported by computer models, including AI and machine learning algorithms, as compared with 47 percent in 2015.

Staying ahead of the curve

Many investment managers are augmenting traditional stock-picking methods with advanced analytical techniques and alternative datasets to stay ahead of the curve. These investment managers seeking organic growth via consistent alpha generation should be on the lookout for creative approaches utilizing technology and alternative data sources for making investment decisions. Alpha generation has shifted the focus

from the stock-picking skills of portfolio managers and traditional financial analysis to augmented processes including:

1. Quantitative and analytical techniques, such as artificial intelligence (AI)

2. New alternative data sources that can provide investment insight

Investment managers are using a myriad of technologies in their investment decision processincluding AI and other advanced analytical techniques to improve their traditional processes. In fact, many hedge funds and family offices are using AI not only for investment decision making, but also for finding better ways for executing trades.

The transition to such augmented investment processes seems to be accelerating as the volume of available data rises exponentially. Investment managers like Man Group PLC (see Rise of Man Group assets via AI and a......................

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This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.