AI and quant trading strategies are nothing without solid fundamentals. As quantamental investing continues to gain traction, Elsen founder and CEO Zac Sheffer considers why human intervention will always be necessary.

  • The unpredictability of markets demonstrates a perpetual need for at least some human intervention.
  • AI has a big role in the future of the investment industry, but even a good quant trading strategy needs solid fundamentals behind it.
  • Webinar will show how artificial intelligence can empower the investment process and support traditional human research.

Investments are continuing to flow into funds that use Artificial Intelligence (AI) to make trading decisions, but in the past few months we’ve seen just how important it is to still have human involvement and good fundamental reasoning behind these strategies.

In February, hedge funds that use AI in their trading processes experienced their worst month ever — or at least since Eurekahedge created its AI Index to track the market in 2011.

Overall it was a poor month for returns with the broader Hedge Fund Research Index falling 2.4 percent. But it was even worse for the AI Index, which dropped 7.3 percent.

These results led JPMorgan to conclude that AI-based funds “likely played a big role in February’s correction by being forced to de-risk given an unprecedented 7.3 percent loss.“

AI is here to stay

Despite these recent challenges, it’s tough to deny that AI will eventually play a central role in the investment world because it’s already seeping into our everyday lives.

While most people may not think about it or just may not realize it AI is no longer the realm of science fiction or limited to publicity stunts by technology companies trying to show off the cutting edge.

We’ve come a long way from when IBM’s Deep Blue squared off against chess master Garry Kasparov in 1997, or when Watson took down Jeopardy’s two biggest all-time champions in 2011.