By | Bernard Marr
The integration of artificial intelligence and the financial industry has always been a match made in heaven—high volumes, the quantitative aspect of finances, need for expediency and accuracy are ideal for the unique skill-set of AI. But, can it impact the high-risk, high-return world of hedge funds? Several companies think so.
What is a hedge fund?
Today, there are more than 10,000 hedge funds that manage approximately $3 trillion in assets. A hedge fund is an investment partnership between a professional fund manager and “limited partners” or investors. The limited partners contribute funds, while the general partner manages the fund according to the fund’s strategy to maximize investor returns and minimize risk. Hedge fund managers can use trading techniques where they “hedge” themselves by going long (if they predict that the market will rise) or shorting stocks when they believe the market will drop. Hedge funds are generally considered riskier investments.
AI on Wall Street
Hedge fund companies use humans to build and train the original system but soon the system can use artificial intelligence to trade stocks entirely without any more human intervention. Companies trading or working toward trading with AI systems include San Francisco startup Sentient Technologies, Renaissance Technologies, and Bridgewater.