It is somewhat ironic that the complex objective of better problem-solving through the amassing and analysis of increasingly detailed information has had to be condensed into a two-word catch phrase: ‘Big Data’. Perhaps this is more a reflection on the human inability to cope with information beyond the attention span of a proverbial goldfish, but the metaphor serves well to illustrate the problem with Big Data.
It is easy to understand the development and use of artificial intelligence as a technological progression, the culmination to date of the advances in computing, data processing, and storage. In this context, it follows that it will be applied in the financial sphere as another method or tool in the toolbox, in the pursuit of investment goals. There is however a different question: Is there such a thing as an artificial-intelligence strategy?
The market is not directing cash into passive investment. Many investors may not appreciate that the longest bull market in history has not generated very much extra money for US equities. What is happening is analogous to active-investment cars being swapped for a seat on the passive-investment bus.
The application of artificial technology to investment management suffers from unmet expectations, at least at this time. We think that some voices in the industry sold investors a resort weekend, only to deliver a highway hotel experience. Capital sources consequently have become more circumspect. Is there still momentum to be found in the artificial-intelligence story? Or are investors leaving it behind?