Role of Artificial Intelligence in alternative asset management

Artificial Intelligence in the context of Alternative Asset management will manifest itself across a number of dimensions; the need to understand the vast quantities of data being generated by economic activity moving online, the ubiquity of networks for conducting these online transactions, and the emergence of algorithms for seeking investment opportunities and making investment decisions. There has already been a rise in the number of Quantitative Funds – such as Aidyia- relying on machine intelligence, neural networks and the ability to mine Big Data to compete alongside the likes of Renaissance Technologies, DE Shaw, Two Sigma and a host of other brand name funds such as Bridgewater Associates and Point72 Asset Management that investigating the scope for AI to generate Alpha. The rise of this machine intelligence can be broken down into two categories: "Active" AI uses technology to seek out opportunities for hedge fund alpha by analyzing data in unconventional ways, uncovering hidden correlations in market data or interpreting "signals" in the marketplace which then generate trading ideas. "Passive" AI takes place in the post-trade arena, opening up time-series of data, connecting flows between markets, counter parties and assets to support Portfolio Managers and Traders in their decision making. By using AI to open up post trade data more aggressively, funds could find their optimal financing mix or most credit-worthy counter parties by searching the market for news that may impact their credit rating or actively size/shape trading portfolio positions in real-time.