The quantitative backlash continues apace. Now, it’s the quants themselves throwing cold water on the idea that Ray Dalio’s principled robots will soon rule the asset management industry—and with it, the earth.
Winton, a $30.6 billion hedge fund that’s used algorithms to trade for two decades, told clients that people must still make the big decisions. Michael Hintze, who runs another major fund, said computer models can spot market anomalies but rarely provide answers. Jordi Visser, investment chief at a third firm, said humans still have the upper hand when it comes to recognizing patterns. Billionaire bond manager Jeffrey Gundlach said he’s betting people will prevail.
“Despite the immense power of modern computing, it is neither advisable -- nor even possible -- to dispense with humans entirely,” Winton, founded by David Harding, who earned a degree in theoretical physics before going into finance, wrote in its letter to clients this month.
But humans have not yet conquered death, as one quant fund reminds its new hires with the most bizarre benefits plan around. Freezing one’s lifeless corpse, however, in preparation for future reanimation, is only one way to achieve immortality. Muhammed Yesilhark has struck upon another: The Steve Cohen protégé is currently training 40 little Muhammeds to carry on his work. No, unlike his former employer he has not established a nursery in which to raise the Muhammed Yesilharks of the future. No: He’s training robots in his own image.
Since he left his job as hedge-fund manager last year, Muhammed Yesilhark has spent his days teaching computers to pick stocks like he did in his 12-year career….
“They never sleep, do not go to the toilet, have no girlfriends or boyfriends,” says the 37-year-old, who was born and raised in Germany. “I think artificial intelligence and investing is a big opportunity…."
The idea to clone his mind was sparked by his trading days at SAC Global Investors, Cohen’s previous investment firm, where Yesilhark was a partner before moving to Carmignac Gestion. Once his models, which can automate as much as 90 percent of the decision-making, detect a potential trade, Yesilhark makes the final call on whether to buy, sell or reject it. His new analysis is codified again and the machine learns not to repeat the same mistake.