Fundamental hedge fund managers are, in growing numbers, being won-over to the concepts of artificial intelligence, machine learning and big data. How much of this is genuine interest as opposed to the fear of missing out is unclear.
What Is Clear
Data science, artificial intelligence, and machine learning have attracted significant attention in recent years, and, propelled by the success of quantitative funds such as Renaissance Technologies LLC and Two Sigma, fundamental managers are increasingly expressing interest in blending these techniques into their fundamental investing strategies. This approach has been dubbed “quantamental” and is practiced by firms from Blackrock to Point 72.
Of course, optimizing data is inherently complex and the accuracy of the predictions derived from this data is directly proportional to the quantity of data available for analysis. Therefore, reliable pipelines of information are paramount to success. Understandably, fundamental managers are struggling to determine cost-effective implementation solutions. This means deciding whether to build out an in-house system or acquire one of many existing software platforms. As a practical matter, the largest funds will have more options than smaller funds in this regard.
The “Ownit”
Currently, the “ownit” is a theoretical investment vehicle proposed in a survey conducted by Citi’s Business Advisory Services and Citi Services entitled Industry Revolution – Investment Management in 2033.
Essentially, the ownit would be a registered investment token, incorporating financial, ownership usage rights, creating new forms of liquid ownership units, hence the moniker, ownits.
The ownit concept is born of block chain technology, which offers the ultimate in transparency. More to the point, it would function seamlessly with primary issuance and secondary trading systems and provide a mechanism to build diversified portfolios in equities, bonds, wine, art, and a variety of other alternative assets…or combinations thereof.
The survey also suggests the concept of the “corpit,” which is an extension of the ownit, but to the corporate world. Corpits are defined as corporate exposure units. Operating in much the same vein as ownits, the corpit offers enhanced opportunities for the corporate world to pursue its unique objectives.
These are exciting concepts about which more can be read here. Of course, the survey itself, Industry Revolution – Investment Management in 2033, addresses the subject in the greatest detail.
What about Hedge Fund Jobs?
These are transformative times in the hedge fund industry. Continued success requires that hedge funds not only embrace new technology, but also understand the potential this new technology offers. Those seeking employment in this industry must understand the lexicon. This is the first step. The second step is to use this understanding to enhance the innovation of new investment products and services, while providing investors with the best opportunities to grow their wealth.
Hedge funds have traditionally been at the forefront of innovation. Data engineering, cloud technology, data science, blockchain technology, and investment research augmented by artificial intelligence and machine learning are the future of the hedge fund industry. Those who prepare their minds and hone their skills in these disciplines have extraordinary job prospects in the hedge fund industry.
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