Sovereign Wealth Funds Partake in the Machine Learning AI Race for Investing
Posted on 11/08/2020
The application of using machine learning is growing for public institutional investors such as sovereign wealth funds. Earlier, Singapore’s GIC Private Limited formed Kepler Holdings Pte. Ltd. (Kepler FI), as an autonomous unit to identify moonshots in the world of asset management and institutional investor investing. Part of Kepler’s mandate involves machine learning and artificial intelligence (AI). GIC also hired data scientists who study the field of natural language processing (NLP). These sovereign investors are keen on constructing intelligent predictive models that emulate human judgment and fundamental research processes. The power of machine learning algorithms in investing is pattern recognition of historical data, as well as alternative data. Truth be told that not every investor has had success in deploying machine learning when it comes to institutional investing. Fake news, data bias, and unknown unknown’s are some obstacles to successful AI implementation. In many anecdotes, some well-known quantitative hedge funds performed poorly in recent economic and disaster events like COVID-19. Will sovereign investors find true value in AI and the subset of machine learning?
Global SWFs and the Rise of Machine Learning
GIC is not the only sovereign wealth fund taking AI seriously. The Abu Dhabi Investment Authority (ADIA) is beefing up its quantitative investing side by identifying leaders in the field. ADIA recently hired Marcos Lopez de Prado, a professor from Cornell University and one-time Head of Machine Learning at AQR Capital Management to work in the wealth fund’s quantitative research and development unit. ADIA also hired Anders Svennesen and Stephen Malinak. Stephen Malinak comes from TruValue Labs, an ESG data company, where he served as chief data and analytics officer. Malinak got his bones in quant investing at StarMine and eventually became Global Head of Persistent Analytics and Data Science at Thomson Reuters (now Refinitiv). The intellectual capital of these strategic hires for ADIA could lead to some interesting developments in the realm of institutional investing, thus impacting the asset management field in general as it adapts to industry consolidation.
Sovereign wealth funds are not the only public funds in the race for artificial intelligence for investing. Under direction from its CEO, Canada Pension Plan Investment Board (CPPIB) seeks to exploit opportunities in data science through hires and the acquisition of data sets and services.
Making Venture Investments
Sovereign wealth funds are not only hiring people in the quant space for internal asset management, but making bold investments in a wide variety of data science, cloud, and AI startups, straddling industries from biotechnology, healthcare, all the way to financial technology. Recent examples of this include Mubadala Ventures investing in clinical trials platform Science 37 and Unlearn.AI, Inc., Russian Direct Investment Fund investing in NtechLab, and Temasek’s investment in Eigen Technologies Limited.
All in all, sovereign funds are competing with AI-powered hedge funds and fund managers in the data race.
