A recent report from MIT explores crowdsourcing and other novel predictive techniques being applied by hedge funds and FinTech startups.
One example cited by the report is hedge fund Numerai which combines crowdsourcing and AI. The fund holds artificial intelligence contests involving amateur and veteran data scientists analyzing Numerai’s private encrypted data. Participants, which act very much like AI consultants to Numerai, are paid through blockchain currencies.
Aidyia launched its AI hedge fund, in which all trades are executed entirely by machine, in January 2016. The hedge fund’s system identifies and executes its own trading strategies autonomously using multiple forms of AI, from one inspired by genetic evolution to another using probabilistic logic. Analyzing everything from prices to macroeconomic data and corporate accounting documents, the Aidyia AI makes its own market predictions and then uses a probabilistic assessment to make its decisions.
The report cites Vetr as an example of crowdsourced ratings for stocks and exchange-traded funds. Vetr was founded in 2013 by a technologist, Zoheb Sait, who had previously worked at Morgan Stanley and Goldman Sachs. The firm hired a new CEO, Mike Vien, a digital entrepreneur, in April 2016.
Vetr is not the only firm providing crowd-sourced stock research. London-based StockViews generates crowd-sourced research, and is shifting its focus from retail to institutional [link requires subscription]. Crowd-sourcing firm Estimize launched a mobile stock ranking application called Forcerank which offers cash prizes for weekly stock-picking contests [link requires subscription]. Then there are the distributors of crowd-sourced stock research such as Seeking Alpha and SumZero. The reality is that crowdsourcing a growing force in the investment research space.
We have also profiled [link requires subscription] Siebels Asset Management Research which has developed a global network of over 2500 research analysts offering institutional investors bespoke investment research. The concept originated when founder Jane Siebels was running a hedge fund and, like Numerai, decided to draw on crowd-sourced sources for its research. In 2014, Siebels sold her hedge fund and focused solely on crowd-sourced research. As the research industry continues to fragment, the technique becomes ever more viable.