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Could computers become the best beta allocators?

by Robert St George on Mar 27, 2014 at 08:39

The second problem was insufficient data collection. ‘In order for an AI program to work successfully, it needs to be able to process the same data as a human. And up until recently, continuously feeding the program with new information was just too cumbersome and unproductive. However, today, with the arrival of cloud computing and big data, virtually all the necessary information is now available online and very easy to access.’

The secular trends of digitalisation and faster computers will only reinforce this. ‘The human information advantage over digital competitors is vanishing rapidly,’ Gave said.

He concluded: ‘We are still in the early days of AI implementation in finance. But we would be best served not to scoff at these advances, but to embrace them, however uncomfortable this may be.’

Indeed, Citigroup is known to be working with IBM on its Watson supercomputer – the one that famously won US quiz show Jeopardy! – to develop automated ways of recommending financial products.

Meanwhile, hedge fund giants Bridgewater Associates last year hired David Ferrucci, formerly IBM’s lead researcher on Watson, to help it develop its systems, which indicates just how seriously asset managers are taking the potential of AI.

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