Is Artificial Intelligence the New Disruptor?

Given the confluence of factors needed for Uber, Lyft, and other ride-sharing companies to successfully disrupt the transportation industry, a similar ‘perfect storm’ is beginning to form in the asset management industry. There is a growing opinion that a comparable set of factors are lending itself to the rise of artificial intelligence (“AI”)-driven hedge funds.

Historically, fundamentally driven fund managers have focused on structured financial data in order to evaluate industries and companies prior to an investment.  Fast forward to present day; we’re seeing a trend of ‘big data’ and its analysis – data scientists and machine learning – begin to disrupt the industry. Computers can analyze much larger sets of data than we’ve seen in the past – from social media data, press releases, satellite information, financial data and more.

Given the emergence of big data, data scientists and machine learning, are AI-driven funds the new disruptor for the asset management industry? Additionally, now more than ever, there is a direct link between Silicon Valley and Wall Street. As opposed to the typical process of a newly launched, promising fund manager spinning out of well-known, successful fund, the industry is now experiencing the rise of the ‘FANG’ talent – talent from the likes of Facebook, Amazon, Netflix and Google – individuals who are able to apply big data to their investment process to yield above average returns.

Jaclyn Greco is a Financial Services Group Manager providing business consulting services to alternative investment funds, including hedge, private equity, and venture capital funds, primarily situated in the pre-launch stage.

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