The use of new age technology in the financial sector is becoming more prominent and the top firms are in a race to find and apply the best possible technology in their business.
JP Morgan has set out its intentions to apply artificial intelligence (AI) in its hedge funds. The firm, which already makes use of AI in its investment banking, plans to make use of the technology by investing in emerging and established machine learning statistical arbitrage hedge funds. AI has also allowed the rise of automated trading platforms that however, are usually scams, such as Bitcoin Trader.
The JP Morgan project has been named the Machine Learning Fund and will find operation in the firm’s $15 billion hedge fund business.
This won’t be the first time that the firm has invested in hedge fund bets. They have previously made investments in the hedge fund business which failed to materialize. The firm previously invested $200 million in Duane Park Capital Management which closed shop after two years. They also pulled back from an investment in a quant firm called Mana partners which never really found its footing in the business.
AI and the investment business
JPM is one of the top firms that have invested billions of dollars into AI and machine learning in a bid to get ahead of the competition and applying said technologies in their businesses. Other firms such as Morgan Stanley have also engaged with industry experts to forge a way to the adoption of these technologies. Last year, JPM started an equity data science unit within its asset management business to see how AI could assist in making decisions about investments.
Machine learning has become the focus of top investment firms because it has the potential to derive investment conclusions from given data without much human intervention. AI is also used in hedge funds to perform research and live trading. In a survey by Barclayhedge, it was determined that over a third of managers have been established as users of AI for portfolio construction while a quarter apply the technology for live trading.
This year, AI and machine learning powered headgear funds have lost money according to Eurekahedge. The statistics were provided by the index which surveys about 14 funds that make use of the technology. However, these hedge funds have outperformed all other computer driven funds over the long term.
Top investment firms are making efforts to secure AI and machine learning as part of their business decision making methods. These technologies can bring some huge advantages and the top firms are in a race towards being industry leaders in the adoption of these technologies. JP Morgan has invested hefty sums of money into AI and they are looking to include the technology in their hedge fund business. It is yet to be seen if the firm will be successful in its intended cause.