According to a person familiar with the matter:
“The bank’s asset management arm is trying to invest in emerging and establishing machine-learning statistical-arbitrage hedge funds.”
According to June 20 regulatory filings, the vehicle dubbed for now the Machine Learning Fund Ltd. will operate within JPMorgan’s $15 billion fund-of-hedge-funds business.
The company has already invested billions in the technology arms race with competitors like Morgan Stanley. They are deploying machine learning and AI in investment banking and tapping industry experts to help shape strategy. Last year, an equity data science unit was started by the company within its asset management business in order to explore how artificial intelligence can improve investment decisions.
Robots that have the ability to learn are considered to be the most happening weapons in the investing arms race.
The alternatives business has stumbled on some of the latest hedge fund bets. It is known to have invested around $200 million with Duane Park Capital Management which did shut down after just two years of operation. The group also pulled a big investment from quant firm Mana Partners which did struggle from the get-go.
JPMorgan’s machine learning strategy comes as the use of AI among hedge fund managers that accelerates in an effort to stand out in a crowded field. With the help of machine learning, a subset of AI computers are able to enhance their ability to find trading signals based on data sampled over time. This is done without much human interference.
Hedge funds are known to make use of AI in many ways. Starting from basic research to advanced live trading, AI is used in every process. According to a Barclay hedge study, it has been found that around two-thirds of managers are known to make use of machine learning in idea generation. More than half of them have deployed the technology for portfolio construction. Around 25% of them have used it for trade execution.
Overall, it has been estimated that around 56% of the 55 hedge funds surveyed in May 2018 said that they use a machine learning approach in their investment processes.