For twenty years, banks, index firms, and asset managers have tried to develop solutions to provide the diversification benefits of hedge funds with low fees and daily liquidity. This effort gained traction during the past decade as more and more institutional investors realized that, in a lower return environment, the traditional hedge fund fee structure could consume a disproportionate share of gross alpha. In this short note, we examine two potential solutions: factor modeling and alternative risk premia. The conclusion is that factor modeling has performed better than expected yet continues to face headwinds for widespread adoption among professional allocators…
The opportunity for hedge funds, private equity, and other active asset managers to raise capital in the US retail market has never been more attractive. Global wealth has grown to over $200 trillion[1], and the individual investor market has been an increasingly important factor in the growth of asset managers. Financial advisors, including RIAs, Wirehouses, and Broker-Dealers, are playing an increasingly important role as their average assets under management surpass $100 million. While these important trends have been seemingly overshadowed by the incredible rise in passive investing, recent fund flows and product launches suggest that investors are turning again to…
Sophisticated trading firms active in listed derivatives markets understand the importance of being able to efficiently manage data across multiple clearing brokers commonly known as FCMs or Futures Commission Merchants. In an increasingly data-dependent world, where change is the only constant, these firms must develop and continuously reevaluate their data management processes. Having worked with a wide range of trading firms including hedge funds, energy companies, commodities merchants, and institutional investors, we have come across and solved many challenges related to managing data across multiple clearing brokers, some of which we present in this short research note.
Start with the End
Whether a firm…
The age of AI, otherwise known as the third industrial revolution, many fear will disrupt the industries and displace humans. Autonomous cars will put drivers out of jobs and drones will displace your mailman. Does it seem evident that AI will eventually displace humankind in the hedge fund industry? We say NO. Here are three arguments why we don’t see AI automating investment decisions.
“Machine Learning is the field of study that gives computers the ability to learn without being explicitly programmed.”
It’s Not About Duplicating
A simple set of rules and some practice. That’s what it takes for a 16-year-old to learn driving…
Algorithms are all around us and used by academics and practitioners alike in many fields. The investment management industry too has been graced by the presence of mathematics and computers to better model and understand market dynamics. The emergence of machine learning brings up a question of how different these new algorithms truly are. Often machine learning is defined as a way to give computers the ability to learn without being explicitly programmed. This might sound far-fetched but developments are on their way. The ideology behind these new algorithms provides a way to reach that state. …
What is the difference between Artificial Intelligence, Machine Learning, and Deep Learning?
Simply put, Artificial Intelligence, or AI, is a state in which machines have human cognitive abilities. Machines of the past required explicit instructions. It took time and a lot of work to construct algorithms or recipes for machines to follow. AI enables machines to make their own recipes.
Right now, artificial intelligence is to Silicon Valley what Fox is to Comcast and Disney. Not just technology, but AI is set to revolutionize every industry. AI is often wrapped with other terms — Machine Learning, Deep Learning, Reinforcement Learning. …
