Research has found a growing number of hedge fund managers are more data-focused and rely on teams of quantitative talent such as physicists or engineers – and less on one or two “star traders”.
This is a key conclusion from a new report from published by trade body, the Alternative Investment Management, and sponsored by asset manager Aberdeen Standard Investments.
The report said the the wider availability of financial data coupled with greater market efficiency has made it harder for hedge funds to yield returns beyond a benchmark.
As hedge fund trading typically involves quantitative techniques of investing, the research said key figures at some of the world’s largest hedge funds will be increasing their reliance on data and AI.
The research also shows apart from adopting AI, hedge funds are rapidly transforming their product offerings in order to meet the changing needs of investors.
This includes adopting other disruptive technologies and partnering with clients on responsible mandates.
Larger hedge funds are becoming “fully diversified asset managers with multiple product offerings at varying fee levels,” AIMA said.
AIMA ’s CEO, Jack Inglis, said: “This paper shows that the pace of change and innovation in the hedge fund industry is only going to increase.
“Hedge fund firms are transforming themselves in order to thrive in tomorrow’s market place. Hedge fund firms have always embraced disruption; the leaders with whom we spoke are committed to making the most of the coming changes in the financial world and are enthusiastic about the opportunities to deliver for their clients.”
The research was based on interviews with 25 figures in the industry who collectively account for over 300 years of industry leadership and manage more than $500bn in hedge fund assets