Moneycontrol.com – Imagine a mathematical system that works like a human brain, can absorb thousands of bits of information in seconds, learn from its mistakes, adapt to new environments and help a manager allocate money to hedge funds. Reuters reports.
No, it’s not Hal from the film 2001 Space Odessey or the Terminator, a robot played by Arnold Schwarzenegger, both artificial intelligence tools that learned human behaviour. But it’s something similar, a neural network that is being developed by Germany’s Commerzbank AG with academics at British universities to earn better risk-adjusted returns for hedge fund investors.
The model will aim to analyse all available information real-time to highlight any potential problems that could damage investment returns. Commerzbank’s head of alternative investment strategies, Mehraj Mattoo told Reuters this week that the traditional way of creating a portfolio of hedge funds was flawed because it relies on history.
“A lot of the models used in the fund of funds world, indeed in finance generally, are flawed because they rely on history as if it was both static and repeatable. If history was such a good gauge then we would all be making money,” Mattoo said.
