Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Innovation Investing Conference
    • 2022 Defined Contribution East Conference
    • 2022 ESG Investing Conference
    • 2022 DC Investment Lineup Conference
    • 2022 Alternatives Investing Conference
Breadcrumb
  1. Home
  2. MONEY MANAGEMENT
April 16, 2018 01:00 AM

Broad adoption will mean better beta for all investors

Douglas Appell
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Eric Nierenberg questioned whether broad adoption will leave 'any alpha left.'

    The prospect of artificial intelligence and machine learning morphing from a hobby horse for a small circle of hedge funds to a standard investment tool for big asset management firms could make markets more efficient and less volatile over time, some observers speculate.

    It could also make alpha harder to come by.

    Hedge funds have led the charge when it comes to artificial intelligence, but in recent years "we've seen it come much more into the mainstream," said Richard Dell, a London-based partner with Mercer and head of the firm's global equity manager research team.

    And that's where, potentially, it could have "bigger implications, because there you're generally looking at firms with an awful lot of capital who are driving price discovery," he said.

    Some observers say the growing weight of capital might shorten the time it takes to arbitrage away the investment opportunities — predominantly short-term and capacity constrained in nature — that artificial intelligence and machine learning programs are offering.

    The number of fundamental stock managers in recent years citing their use of satellite data counting cars in Walmart Inc. parking lots is more reason to invest in the firm selling the data than with the managers using it, said Eric Nierenberg, chief strategy officer with the $67 billion Massachusetts Pension Reserves Investment Management Board, Boston.

    With so many managers availing themselves of that data, "I don't know that there's going to be any alpha left," Mr. Nierenberg said.

    The question of scale — in terms of the investment opportunities identified by AI and machine learning programs — "will become more relevant as players such as BlackRock and Fidelity step up, with the resources they have to put behind this (far exceeding those that) a $10 billion hedge fund can bring to bear," said Timothy Bruce, director of traditional research with Boston-based investment consultant NEPC LLC.

    Mercer's Mr. Dell said it's too early to determine if "everyone is going to be using the same machine learning algorithms and coming to similar conclusions, or whether it's going to be people with baked-in advantages because they've developed their own capabilities."

    But with a growing number of big asset managers likely to move in the direction BlackRock Inc. has gone, relying more on quantitative and data-focused professionals and relatively less on fundamental analysts, the question of what that means for price discovery will arise, he said.

    "Does it become commoditized as everyone comes to the same conclusions? Do prices better reflect reality, and does volatility become potentially less because there are less behavioral biases driving markets," asked Mr. Dell.

    The enhanced insights money managers can glean by analyzing big data should lead to a more efficiently priced market in the short term, making it harder for stock market bubbles to develop, said Tony Ho, co-founder and managing director of Hong Kong-based Sandalwood Advisors, an alternative data platform focused on Chinese consumer spending trends.

    The broad use of big data should better ensure that resources are allocated to companies that are performing well, said Mr. Ho. Managers will know almost instantly when companies are doing well or badly, and bad companies no longer will have much room to talk up their share prices, he said.

    "All the information will be out there, people will know," said Mr. Ho, adding that such a transformation could be underway now.

    Related Articles
    Capabilities key to firms' future success
    Race is on to grab most possible from machine learning
    Data labs becoming essential for managers to advance growth
    Capabilities key to firms' future success
    Race is on to grab most possible from machine learning
    Data labs becoming essential for managers to advance growth
    Commentary: Big data analysis is coming to a pension fund near you
    Commentary: It's cultural – why investment management has yet to fully embrace …
    Speaking in the same tongue
    D.E. Shaw chooses professor to lead new machine-learning research group
    Recommended for You
    ONLINE_190409823_AR_0_IKORPGTOQWEM.jpg
    Fidelity AUM rises 9% in year ended March 31
    Baxter_Georgette_i.jpg
    RhumbLine selects client service-business development director
    Exchange_Traded_Funds_Tablet_i.jpg
    SEI joins ETF fray with U.S. large-cap stock funds
    OCIO, Anchor in Rough Seas
    Sponsored Content: OCIO, Anchor in Rough Seas

    Reader Poll

    May 9, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Are Factors a Thing of the Past?
    Q2 2022 Credit Outlook: Carry On
    Leverage does not equal risk
    Is there a mid-cap gap in your DC plan?
    Out of the Shadows: The Revolution in Shadow Accounting
    The pivotal role of fixed income markets in the ESG revolution
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    May 9, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Innovation Investing Conference
      • 2022 Defined Contribution East Conference
      • 2022 ESG Investing Conference
      • 2022 DC Investment Lineup Conference
      • 2022 Alternatives Investing Conference