New tools of active management: how machines can support the investment process

SINGAPORE (Jan 12): Machine learning has become a popular area of research across a range of disciplines. From driverless cars to online retail, the evolution of these techniques has largely taken place outside of finance – but in recent years, the investment industry has started to adopt them as tools to support the search for alpha.

While still in their infancy, we believe that the applications of machine learning to investment have the potential to enhance active management in a range of ways: allowing data to ‘speak for itself’ to identify patterns, support execution and even complement discretionary strategies.

We argue that while these new tools may be useful to investors, they also need careful management and the guidance of skilled professionals in order to work. In this context, we believe that the investment industry must work closely with academics and practitioners in other fields, harnessing the power of machines to develop pragmatic applications to investment.

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