Financial firms have generally been slow to accept artificially intelligent stock pickers. They have already invested billions collectively to bring in quantitative analysts, who do major number crunching as well as develop powerful non-AI algorithms. Some argue that there isn’t a lot of easy money left on the table for AI to pick up.
Even so, hedge funds are now starting to turn to AI to give them an edge. Hedge fund managers, with their high fees (typically 20 percent of profits and 2 percent off the top of whatever an investor puts in), need to have healthy returns to justify the costs. And this year, two top-performing hedge funds have used machine learning to bump up their profits, according to the Wall Street Journal. One firm said that AI accounts for more than 50 percent of its gains so far.
Not all firms are just getting into AI. One, called Voleon, was launched to start experimenting with machine learning for investing in 2008. It lost money until developing a second-generation platform that started bringing in profits in 2011—and continued through 2015. Voleon lost money in 2016, though, a sign that AI isn’t a surefire way to beat the markets.
Don’t settle for half the story.
Get paywall-free access to technology news for the here and now.