In the 1980s and 1990s automated products
emerged, such as quantitative hedge funds. Today, machines are gaining
autonomy. This means that software programs using artificial intelligence (AI)
develop their own strategies without needing human presence and guidance. Thus,
hedge funders are using such mechanisms, as processing power grows alongside
with the abilities of machines.
Considering the flow of information, and the
complexity of markets, human fund managers cannot compete with machines.
Programs with advanced artificial intelligence are writing their own investing
rules, that are not understandable by human beings.
Funds run by computers that follow rules set
by humans, the so called quant funds, account for 36% of the stock market of
the United States of America, up from just 18% in 2010 (note that each day
around 7 billion shares worth 320 billion dollars change hands).
The total value of American public equities
is 31 trillion dollars (Russell 3000 index). There are three types of
computer-managed funds: a) index funds, b) ETFs, and c) quant funds. They run
around 35% of the above amount of funds. Human managers manage 24%, while the
rest is at a hybrid mode, or harder to measure.
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