Man Group Chief Investment Officer Sandy Rattray says there’s still a general feeling of “exceptionalism” among some old-school discretionary traders who refuse to implement machine learning technologies into their business, particularly when it comes to trade execution. Yet he still called artificial intelligence the most overhyped theme of 2018.
Speaking at the AI and Data Science and Trading Conference in New York, Rattray said that hedge fund giant Man Group is now two-thirds quant-focused and one-third discretionary, though the firm uses machine learning to execute nearly 100% of its trades. “I think it’s complete garbage that machine learning can’t be used in discretionary trading,” he said. Noting that many old-school traders in the industry are still “kicking and screaming” over algorithmic trading, Rattray compared them to taxi drivers who were faced with the advent of Uber and other more efficient competitors. “You can protest, like taxi drivers did in Europe, or you can figure out how to change and get on with it,” he said.
Rattray pointed to management as part of the problem. “It takes a discretionary manager who wants to bring new ideas in rather than having them forced upon them,” he said.
However, Rattray cautioned that machine learning and artificial intelligence technologies are still new and their effectiveness in asset management has been overblown at times, at least outside of trade execution.
“Big data has been like the gold rush. Some came back with gold, but most came back with dirt,” he said. “There’s clearly a revolution going on, but the overall hype is garbage. Forecasting what the market will do – good luck getting machine learning to help you with that.”
Still, he harbored back to his original point: if you aren’t at least using machine learning and AI for what it can achieve currently, you’re behind the curve, and that machine learning techniques are still very young and will continue to incrementally improve. When faced with a question about the generally poor returns of many quant funds in 2018, Rattray noted that purely discretionary funds likely performed even worse.
"The best discretionary managers need to be looking for a [technological] edge to not become redundant," he said.
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