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  • 08.22.16

This AI hedge fund makes trades better than its maker

 Yoshinori Nomura has been training his artificially intelligent hedge fund Simplex for more than three years. But the fund finally had its big moment during Brexit. 

Ahead of Britain’s decision to exit the European Union, Nomura’s artificially intelligent hedge fund seemed to make the wrong bet by selling off Japanese futures before prices were expected to rally, according to Bloomberg. But when final vote counts indicated a split between the U.K. and the E.U., it initiated a sell-off and stock prices spiraled down. Nomura’s AI-based fund had made the right move and ended the day up 3.4%.  

Simplex is one of a small but growing number of hedge funds experimenting with machine learning to make investment decisions. Two of the most well-known funds to use computers and quantitative trading are Two Sigma and Renaissance Technologies, which had vast resources in this area. Though Simplex is not as big as either Two Sigma or Renaissance, it’s still able to use self-learning technology that can adapt and refine as it takes in more information potentially to great effect. Early case studies like Simplex’s Brexit event, give hope to other smaller funds that may be dabbling in this technology.  RR