The use of artificial intelligence will add impetus to the digital change in the financial market. An award-winning fund manager this week will launch a fund that is under the full control of artificial intelligence.
Artificial intelligence and highly intelligent computers will revolutionize the world of asset management to an extent that there will be no place for human beings in this part of the industry.
This analysis is not new. The term artificial intelligence dates back to the mid-twentieth century and has been repeated with every new step in the development. Without coming true.
Revolution About to Begin
But the revolution is about to begin, at least according to Juergen Schmidhuber (pictured below), a professor of artificial intelligence at the University of Lugano and one of the world’s leading experts in this field.
«Since 1941, every five years, counting has become cheaper by ten times,» he told finews.com in an interview. Learning computer networks are already able to assist or even replace human beings in the financial-services industry.
Walzenhausen – Epicenter of Artificial Intelligence
Google and Apple have been working with artificial intelligence for some time already and asset managers such as Blackrock and Bridgewater have experimented with the use of such tools. These industry giants haven’t disclosed the results of their experiments.
The epicenter of the use of artificial intelligence is in Switzerland – and not in Silicon Valley. In a village called Walzenhausen, not far from Lake Constance, a fund manager has developed the use of artificial intelligence in portfolio management. Hendrik Leber (pictured below) is the founder and owner of Acatis asset management. He used know-how of a team led by Schmidhuber to make the technology fit for use in his industry.
«This Computer Is Vastly Superior to Me»
Leber this week will launch the first completely machine-optimized fund, in cooperation with Bayerinvest. We are releasing the computer into the wilderness, Leber told finews.com. The fund manager recently was elected as the fund manager of the year by Finanzen Verlag.
And yet: «I readily admit, this computer is vastly superior to me.»
The tests with the new fund have shown that the use of artificial intelligence yields phenomenal results.
Outperforming Traditional Funds
The experimental fund outperformed the market by 3 to 5 percent a year over a five-year period, and 10 to 50 percent a year in the preceding period. Which goes to show that markets have become more efficient as well.
Computer-based research and trading programs have been in use at hedge funds for some time already. Some achieved great success, others great losses. The difference with Leber’s machine is that it is able to discern certain patters of non-linear developments, they are capable of what experts call ‘deep learning’.
An Eager Scholar
The machine analyzes the data available for instance at companies, detects patters, establishes certain structures and rules. The fund manager says that the computer is working as long as it takes to establish the optimum. Something that can’t be achieved manually, according to the fund manager, which started his career at McKinsey.
Leber says that he only understands part of what the computer is doing and claims that he just initiated the beginning of the end of what we know as fund management. The performance of computers will continue to increase in leaps – which suggests that computer programs will replace human beings in the segment of banking.
So far, banks and wealth managers are using tools such as robo-advisers and digital tools to assets and enhance their performance. Computers are being taken as tools to improve the product line.
The End of Civilization as We Know It
Schmidhuber is convinced that artificial intelligence is set to take off and develop at great pace. «The civilization dominated by human beings will come to an end in the coming decades,» he claims. Artificial intelligence will spread autonomously and reach into space, because that is where almost all resources are to be found.
We, as human beings, have our limits, but not the computer. Artificial intelligence will display unbelievable creativity to develop and won’t take much care about human beings anymore.
See finews.com for the full interview with Henrik Leber tomorrow.
