According to Eurekahedge, a leading hedge fund index, the performance of 13 AI-driven hedge funds has averaged a 10.6% return since 2010. Major asset management firms like Two Sigma and Goldman Sachs have increasingly integrated artificial intelligence into their core strategies and research processes.
Luke Ellis, CEO of Man Group, one of the largest hedge fund groups, has stated that if AI computing power continues to grow at its current pace, it could manage 99% of global investments within 25 years. Man Group has already allocated around $13 billion into AI-powered hedge funds, signaling a major shift in the industry.
An image titled “AI Operational Hedge Funds Performance Has Gradually Surpassed Humans†is displayed below, illustrating the growing dominance of AI in financial markets.
Artificial intelligence’s ability to process vast amounts of data far exceeds human capacity. For instance, AI systems can quickly analyze unstructured social media and smartphone data, allowing companies to predict revenue or sales trends faster than traditional analysts.
Opimas, a financial consulting firm, predicts that by 2025, 300,000 fund managers, analysts, and back-office staff will be employed globally, with 90,000 of them at risk of being replaced by AI. This shift is driven by the underperformance of many traditional hedge funds over the past decade, prompting investors to seek out AI-powered alternatives.
Hedge Fund Research reports that Quant Funds have grown by 86% since 2010, reaching $94 billion in assets. In 2016, while most hedge funds lost $83 billion, quantitative funds gained $13 billion, a trend that continued through September 2017.
Vasant Dhar, who launched the first personal intelligence hedge fund two decades ago, believes AI can process data, generate hypotheses, test them, and provide insights that fundamentally change how humans work. His firm, SCT Capital Management, manages about $350 million and relies heavily on algorithmic decision-making.
Human analysts are now starting to learn coding skills to remain relevant. Martin Taylor, who shut down his non-AI hedge fund Nevsky Capital in 2016, emphasized that when fund returns decline, managers must invest more in engineers, often cutting human roles to maintain profitability.
Acadian Asset Management, an AI-focused hedge fund, has seen its assets grow by 79% over the past five years, reaching $93 billion. Its team consists of individuals with diverse backgrounds in statistics, programming, and market experience, all of whom are proficient in writing code.
Juergen Schmidhuber, a renowned AI researcher and hedge fund adviser, believes that neural networks will become powerful predictive tools across industries. In the future, many transactions may be executed automatically through self-learning algorithms, with human input becoming less frequent.
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