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Machine learning set to shake up equity hedge funds – Financial Times

AI seen becoming powerful enough to forecast market moves better than humans

Financial Times May 25, 2017 by: Lindsay Fortado and Robin Wigglesworth

Machine learning poses a threat to equity hedge funds within the next decade as the technique becomes powerful enough to forecast market moves better than humans, one of the earliest investors in the industry is forecasting.

Jeff Tarrant, the founder of Protégé Partners, says that the model of hedge funds charging “2 and 20” — a 2 per cent management fee and 20 per cent performance fee — for investing in large-cap stocks rising and falling “doesn’t work any more” and is ripe for disruption.

He pointed to the overhaul of other industries in the past decade at the hands of engineers and scientists. “Jeff Bezos picked off the bookstore business. Apple totally picked off the music business and Netflix totally changed television. Now [machine learning] is going to pick off the hedge funds.”

Read the full story on Financial Times
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