Hedge funds have been trying to teach computers to think like traders for years. Now, after many false dawns, an artificial intelligence technology called deep learning that loosely mimics the neurons in our brains is holding out promise for firms. WorldQuant is using it for small-scale trading, said a person with knowledge of the firm. Man AHL may soon begin betting with it too. Winton and Two Sigma are also getting into the brain game.
Citadel is building its team in London. Christian Hesse, who until this month was working in a hybrid sales trader and quant role at Deutsche Bank, just joined the hedge fund as a quantitative researcher. Hesse has a PhD in Cognitive Science from Birmingham University, which is not unusual for a quant. More interestingly, however, he spent the first seven months of his banking career in 2009 working as a'scientific employee' at Deutsche Bank's secretive Quantitative Products Laboratory in Berlin, which is focused on machine learning projects. As well as building in equities, and hiring from Goldman Sachs to populate the new team, Citadel has acquired Citi's Automated Trading Desk Division – which was a pioneer of high frequency trading – and has also been hiring quant talent for this division.
MACHINE-LEARNING is beginning to shake up finance. A subset of artificial intelligence (AI) that excels at finding patterns and making predictions, it used to be the preserve of technology firms. The financial industry has jumped on the bandwagon. To cite just a few examples, "heads of machine-learning" can be found at PwC, a consultancy and auditing firm, at JP Morgan Chase, a large bank, and at Man GLG, a hedge-fund manager. From 2019, anyone seeking to become a "chartered financial analyst", a sought-after distinction in the industry, will need AI expertise to pass his exams.