Hedge Funds are increasingly turning to engineers and data scientist to create artificially intelligent traders. These new programs are built to digest gobs of data and make investment decisions without human intervention. Today a few funds have given computers full control, but you can expect that there will be many more in the future.
Hedge funds have long relied on computers to help make trades. According to market research firm Preqin, some 1,360 hedge funds make a majority of their trades with help from computer models—roughly 9 percent of all funds—and they manage about $197 billion in total. But this typically involves data scientists—or “quants,” in Wall Street lingo—using machines to build large statistical models. These models are complex, but they’re also somewhat static. As the market changes, they may not work as well as they worked in the past. And according to Preqin’s research, the typical systematic fund doesn’t always perform as well as funds operated by human managers (see chart below)