Investment

Chart of the Month – Artificial Intelligence & Hedge Funds

by Alexis Sautereau

Artificial Intelligence & Hedge Funds

 

Artificial Intelligence and Hedge Funds

Artificial Intelligence and Hedge Funds

Artificial Intelligence and Hedge Funds
Source: NS Partners, Bloomberg

 

Artificial Intelligence (AI) has been mentioned for quite some years by traders from the quant world. Nevertheless, it was reasonable to wait a few years before we could establish valid congruence between this innovative data management approach and financial market intricacy. After 4 years investigating that space, we started to see some signs of maturity and constructive outcomes back in 2020-21. So, after a 5 years hiatus and no quant strategy exposure, we made the decision to allocate to some AI related strategies back in Q4 2021 and increased this segment in Q1 2022 to reach up to 20% of the strategy HF Uncorrelated allocation at the end of Q2 2022.

One of the most interesting features of these strategies is obviously their self-learning ability, both about their mistakes and great ideas. This also allows to address a more intricate market behavior: time windows. The ability to grow or shrink certain segment of a book not only from asset class point of view, a trend or momentum point of view but also considering the time frame value of a trade bring undeniable robustness to a trading strategy. This is one of the strength AI is bringing to the equation since it requires non-linear and multi-dimensional approach, in other words non-intuitive interactions

Nevertheless, an important aspect of our side of the job when picking such strategies, is to avoid to aggregate the same type of risk just because they adding value as such. AI and how it is used can protect your investment from alpha decay…the enemy of quant traders.

The graph attached is showing that yet it is possible to find generally uncorrelated strategies vs. generic markets using advanced data management but almost as important, uncorrelated strategies between each other. Some of that diversification can easily be achieved by differentiated asset classes exposure, but the key element resides in the granularity with which managers exploit the strength of AI yet with positive alpha in mind.

The four managers now part of the strategy allocation are showing such quantitative features and bring a well needed support in the very difficult markets we are dealing with this year.

 

 

 

 

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instrument referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the FINMA cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners Group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer.  Additional information is available on request.

© NS Partners Group

Return to listing
back to
the top
Antonio Mira
CHIEF FINANCIAL OFFICER, MEMBER OF THE EXECUTIVE COMMITTEE

Antonio Mira joined NS Partners in 2006 as Group Chief Financial Officer. He heads the corporate functions and is involved in coordinating and implementing the decisions of the Executive Committee.
An experienced bank auditor, Antonio started his career in 1995 with Arthur Andersen, where he worked for some 7 years before joining Ernst & Young in 2002 as a Senior Manager.
Antonio is a Swiss chartered accountant and a Business graduate of Lausanne University (HEC).

Sébastien Poiret
DEPUTY HEAD OF WEALTH MANAGEMENT

Sébastien Poiret joined NS Partners in 2008 and manages funds of hedge funds and private client mandates. He also oversees the development of the Group’s offices in Mauritius.

Prior to joining NS Partners, he served as a Trader, Head of Manager research and Portfolio Manager in the USA and Switzerland for a single hedge fund (1998-2004) and for Optimal (2004-2008), Grupo Santander’s fund-of-hedge funds operations.

Sébastien holds a Bachelor’s degree in Corporate Finance from the ESPEME Business School (EDHEC Group) and an MBA in Finance and Economics from the Institute of Business Administration, both in Nice.

Abir Oreibi
BOARD DIRECTOR

Abir Oreibi joined the Board of the NS Partners Group in 2018, where she brings her truly international perspective and rich experience.
Among many other ventures, Abir set up Alibaba.com’s first European office. After living and working in Shanghai, Hong Kong, Bangkok and London, she now lives in Geneva, where she is CEO of Lift Events, an organization that identifies technology trends, their business and social impact through the organization of events and open innovation programs. Issues related to the challenges and opportunities created by new technologies as well as the strategic responses from organizations are at the heart of Lift’s activities.
Abir holds a BA in Political Sciences from the University of Geneva. She is an investor, and member of advisory and innovation boards.

Romain Pidoux, CAIA

Add Your Heading Text Here

Romain Pidoux joined NS Partners in 2011 and heads the Group’s Risk Management.
He started his financial career in 2005 as Head of Quantitative Analysis for a Swiss Family Office, selecting funds and managing portfolio allocation. In 2008, he switched to the alternative world and joined Peak Partners as hedge funds analyst.
He is a Chartered Alternative Investment Analyst (CAIA) and holds a Master’s degree in international relations from the Graduate Institute of International Studies at Geneva University.

Your browser is not supported. Please use another browser.