Chronicles: Issue 17, July 2021

Dear Investment Professional, 
Not everyone has to be a master coder or a world-class quant, but it’s becoming increasingly important for investors of all stripes to understand how data science, artificial intelligence (AI), and machine learning (ML) will impact investment processes. Across asset classes, more managers are utilizing these tools to generate differentiated sources of return, but allocators also see the incremental benefits of the operational efficiencies and scale that AI and ML have introduced. On the flip side, as I wrote in a recent What About Beta? post1, allocators need to be wary of overfitting and “machine-washing” in this space. Indeed, everyone seems to claim that they incorporate machine learning in their techniques, but as definitions keep evolving, responsible investors should be able to discern when these technologies are simply automating DCF spreadsheets to save time or offering access to genuine sources of alpha.

The CAIA Content Team

John L. Bowman, CFA, Senior Managing Director, TwitterLinkedIn

Keith Black, PhD, CFA, CAIA, FDP, Managing Director Content Strategy, TwitterLinkedIn

Guowei Jack Wu, CFA, CAIA, Content Director, APAC, TwitterLinkedIn

Aaron Filbeck, CFA, CAIA, CIPM, FDP, Director, Global Content Development, TwitterLinkedIn