It said its $615 million Multi-Markets Program, a long-short strategy using futures and currency instruments, has returned a net 47% over the past five years through July, during which it played with AI methods.
That trumps around 18% over the same period for a Societe Generale SA index tracking commodity trading advisors which are typically trend followers.
Humans Out
The AI buzzword encompasses a wide range of techniques, from interpreting text to mimicking neural networks in the brain. To skeptics, it all remains untested, complex and prone to human-like pitfalls such as detecting patterns in backtests that fail to materialize in the real world.
That’s not stopping a herd of money managers betting computers will uncover patterns undetected by the human eye.
JPMorgan Chase & Co.’s asset management arm is planning a strategy to invest in statistical-arbitrage hedge funds powered by machines that learn. Berkeley-based Voleon Group, which depends on the technology for trading, has seen assets in its hedge fund double to $5.1 billion in the year through June 1.
Millburn hasn’t given up on trend following entirely despite its pursuit of systematic strategies with a more macro and cross-asset tilt. Price momentum remains one of many trading signals used by the firm. But with more and more cash chasing the same quant strategies, Goodman reckons it’s time to shake things up.
“Positions began to look more similar across various trading firms and we had what from time-to-time could be pretty significant crowding,” he said. “This meant less diversification for investors and potentially higher volatility.”
This article was provided by Bloomberg News.