The advent of big data and artificial intelligence (AI) has emerged as a major game-changer for the financial industry. In the asset management sector, although the adoption of these innovations is still in its infancy, a growing number of players are examining how they can be used to design better investment strategies.
But while it is true that improvements in data analytics may bring valuable insights for investors, there is little hard evidence that big data and artificial intelligence actually work in practice, at least for now. Concrete cases of investment managers able to deliver consistent outperformance in real life using these techniques are still absent.
A solid investment strategy requires extensive empirical testing and falsification on broad samples of data and over long periods of time, but the evidence for big data and artificial intelligence is largely anecdotal. Strategies based on big data and artificial intelligence may also lack the necessary backing by a clear economic rationale. In fact, most investment ideas solely rely on paper back-test results, which should always be considered with caution.
We always strive to identify factors that are rewarded with superior risk-adjusted performance over the longer term. We also look beyond mere statistical patterns and aim to understand the economic drivers of returns.
As a result, managing money based on an untested AI algorithm that scrutinizes exotic datasets raises a lot of concerns, even though big data and artificial intelligence have become a popular discussion topic among investors. Moreover, these innovations pose a number of challenges for asset managers looking to incorporate them into their investment process.
The first of these technical challenges is that ‘big data datasets’ generally have a short or even very short history. The second issue has to do with the lack of breadth, or at least the very fragmentary nature, of most big data signals. Another concern is that many signals provided by big data and AI tend to be very short-term focused. Finally, high quality datasets are not easy to obtain and can be very expensive.
For now, we see more potential in analyzing data signals available from credit, option and lending markets, using proven and transparent techniques
Given all the caveats mentioned above, we consider the current trend around big data and AI as a very interesting development, but one that should be treated with caution. For now, we see more potential in analyzing data signals available from credit, option and lending markets, using proven and transparent techniques, than in analyzing exotic big data variables with complex algorithms.
At the same time, we acknowledge the potential disruption this kind of innovation may lead to in the future. In the past, the datasets that are currently widely used by quantitative asset managers were subject to similar issues as big data today. Over the years, the quality, breadth and history of these datasets improved, and they became usable. Now, as time passes and more data becomes available, big data will probably also become increasingly usable.
Finally, the fundamental issue for investors may not necessarily be about choosing between one type of data or the other. There is a wide array of possibilities between sticking to traditional price and financial statement information, and solely relying on things like satellite imagery of parking slots. For example, big data and AI signals could be very useful to fundamental credit and equity analysts. This would feed through into our quantitative strategies, that take analyst revisions into account. In this case, we would be using big data and AI information in an indirect manner.
The content displayed on this website is exclusively directed at qualified investors, as defined in the swiss collective investment schemes act of 23 june 2006 ("cisa") and its implementing ordinance, or at “independent asset managers” which meet additional requirements as set out below. Qualified investors are in particular regulated financial intermediaries such as banks, securities dealers, fund management companies and asset managers of collective investment schemes and central banks, regulated insurance companies, public entities and retirement benefits institutions with professional treasury or companies with professional treasury.
The contents, however, are not intended for non-qualified investors. By clicking "I agree" below, you confirm and acknowledge that you act in your capacity as qualified investor pursuant to CISA or as an “independent asset manager” who meets the additional requirements set out hereafter. In the event that you are an "independent asset manager" who meets all the requirements set out in Art. 3 para. 2 let. c) CISA in conjunction with Art. 3 CISO, by clicking "I Agree" below you confirm that you will use the content of this website only for those of your clients which are qualified investors pursuant to CISA.
Representative in Switzerland of the foreign funds registered with the Swiss Financial Market Supervisory Authority ("FINMA") for distribution in or from Switzerland to non-qualified investors is ACOLIN Fund Services AG, Affolternstrasse 56, 8050 Zürich, and the paying agent is UBS Switzerland AG, Bahnhofstrasse 45, 8001 Zürich. Please consult www.finma.ch for a list of FINMA registered funds.
Neither information nor any opinion expressed on the website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. An investment in a Robeco/RobecoSAM AG product should only be made after reading the related legal documents such as management regulations, articles of association, prospectuses, key investor information documents and annual and semi-annual reports, which can be all be obtained free of charge at this website, at the registered seat of the representative in Switzerland, as well as at the Robeco/RobecoSAM AG offices in each country where Robeco has a presence. In respect of the funds distributed in Switzerland, the place of performance and jurisdiction is the registered office of the representative in Switzerland.
This website is not directed to any person in any jurisdiction where, by reason of that person's nationality, residence or otherwise, the publication or availability of this website is prohibited. Persons in respect of whom such prohibitions apply must not access this website.