Picking Your Winners

by Plotinus

There remains an enduring attraction with horse racing. Within understanding that behind each of the runners and riders there lies a depth of meticulous preparation to reach optimum condition for race day, there always is the flurry of chance that holds sway, pitting punters against bookies, and underdogs against odds-on favorites. Everyone knows that for all the preparation in the world there is a maelstrom of other conditions that can come into play that inject the thrill into racing.

Then again there are some who can breakout beyond pure chance with the skill to consistently spot and pick their winners.

Parallels can be drawn with investment management. With a packed field of strategies, managers, and approaches, good selection can often seem like it comes down to a stroke of luck. In investment management there are those too, who have the skill to read the form and understand the conditions of the market, its cycles, future directions and spot winners from those who are not yet the bookies’ favorite.

Artificial Intelligence strategies, as they emerge, are the young bloods of the investment industry. Their technological freshness is paradoxical. In being innovative and new, they lack the long track record pedigree of thoroughbred traditional investment approaches, whilst at the same time, there is in that technological innovation the fiery potential of a being a future and dominant winner.

Ironically it is these same traditional investment approaches which are used to gauge the new innovations, that themselves are rapidly falling out of favor with investors, who increasingly choose passive, rather than active management.

This is perhaps where the artificial intelligence approach can best meet an investors’ needs, as a new form of active management that does not see itself in competition with passive investment. Instead it can be thought of as an investment approach that can work alongside the passive.

In so doing, it can be a solution to mitigate the hidden dangers of pure passive investing when one considers the rapidity with which passive investing has become the majority of investors’ preference. Being used in this manner, artificial intelligence investing can help break free of traditional investment molds and offer the investors with passive investments the edge that’s needed to win in the final furlong.