CONTACT US
Mr. Weinberg discusses a third wave of investing - Autonomous Learning Investment Strategies   (ALIS).

Trends Watch: August 3, 2017

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.  

This week, Elana talks to Michael Weinberg CFA, Chief Investment Officer of MOV37 and Protege Partners.

What is your outlook for alternative investments?

We believe we are on the cusp of the third wave of investing.  The first wave was fundamental investing, the second wave was computational finance and the third wave is Autonomous Learning Investment Strategies (ALIS).   Like Uber, which was highly disruptive to the taxi industry, we believe ALIS will be highly disruptive to the asset management industry. Uber was only viable due to a confluence of factors, such as Cellular/Wifi, GPS and the internet.  Similarly, ALIS is only now viable for the first time due to a confluence of five factors: the exponential growth of unstructured non-financial data, data-science, record low processing and storage costs, machine learning that is finally working and managers no longer able to play to close to the information edge due to fines and penalties for trading on material non-public information.  ALIS managers benefit from this confluence of factors and use them to develop systematic quantitative strategies that we believe are able to achieve impressive returns to investors with minimal beta or correlation to traditional long-only or alternative indices.  Though we still believe there is a place for fundamental discretionary managers investing in small capitalization securities, credit, and other capacity constrained strategies, we believe that ALIS managers will increasingly take returns and alpha from mid, large, and mega capitalization fundamental discretionary equity long-short managers. 

What is your outlook for the markets?

Though we believe that we are long overdue for a correction or bear market as we are in the ninth year of an equity and credit bull-market, there is also a case made by some of the world's top investors that we know that we could be in a 1998 environment, and there could be another couple of years left to the bull market, or even a similar melt-up.  Either way, our investment philosophy is contingent upon investing in ALIS managers with no, low, or variable bias, and not long-only, short-only or long-biased managers.  We therefore believe these ALIS managers will be able to generate returns irrespective of the market regime and based on alpha and not beta. 

What keeps you up at night?

We believe there is a mismatch in the skill set of the unemployed and those that are likely to become unemployed due to technological obsolescence of existing roles. Science, technology, engineering and Mathematics (STEM) are where we believe future employment opportunities will be best.  We do not believe America, for example, is doing an adequate job quantitatively or qualitatively educating its labor force in these disciplines.  We believe if America is to continue to be a global leader in technology and innovation it must devote more resources to this effort.  For further thoughts on this, we recently wrote an article published by All About Alpha, CAIA, entitled “Brief Thoughts on the Impact of Autonomous Learning Investment Strategies on Investment Management and Employment.”

Elana Margulies-Snyderman is an investment industry reporter and writer who develops articles, opinion pieces and original research designed to help illuminate the most challenging issues confronting fund managers and executives.

* Required