PARTNER CONTENT
Leda Braga, the founder of Systematica Investments, discussed the vital importance of technology and gave her views on AI and markets in a wide-ranging discussion with Bill Stone at the SS&C Deliver Europe summit.
The Brazilian hedge fund manager, whose firm manages about $17bn, leads one of the world’s most successful quantitative managers.
Her fireside interview opened the conference at the Fairmont Windsor Park near London, marking the first time SS&C has brought its client conference to Europe, with more than 200 clients and executives in attendance.
Braga shared her view that artificial intelligence (AI) approaches had been shaping the industry for some time, for years before the huge attention surrounding ChatGPT’s emergence – and would continue to do so.
“This whole AI and machine learning revolution is perhaps more of a revolution for the people outside of our organisations and industry,” she said. “The mathematical techniques that underpin most machine learning and related approaches and algorithms we have used for a long time.”
“But there are two other aspects of the change that I think are particularly valuable to us. One is the availability of data, which wasn’t there 10-20 years ago. Nowadays, everything is a dataset. But they are much more sophisticated, which means we now have a dedicated data research team to process the data.”
The development of new and bigger datasets on a mass scale has led to adaptations to Systematica’s data team, with dedicated researchers now focused on interpreting and processing sets with wide-ranging characteristics.
“If you think about 10-20 years ago, a dataset was a time series of some sort, which you can process with some standard techniques,” she said. “Nowadays, anything is a dataset, from collections of images and the number of clicks on a web page to sentiment or unformatted data. So we use feature engineering to understand the features of datasets.”
A second big change noted by Braga was the “glamour surrounding data science” in countless headlines over AI and tech last year. “But the thing I would caution against when it comes to AI and machine learning is the glamorous notion of true autonomy – a self-driving car or a self-managed fund with no human involvement at any stage.
“I suspect a self-managed fund is never going to be possible because of the amount of randomness in stock and securities markets. No matter how good your algorithm is, if you toss an unbiased coin a billion times, and if you feed the billion outcomes to the algorithm, the algorithm will be no better at predicting the next outcome.”
Braga shared her views on technology with Stone, who described AI approaches like machine-learning and natural language processing as “the first real revolution in technology in the last 35-40 years.”
He added: “It’s going to change everything we do. It’s going to do it faster, it’s going to do better – if we control it. It’ll do wrong fast too, just like if you have large Excel spreadsheets, and you copy the wrong column, or you copy the wrong word, it gives you bad information.”
The pair agreed on the need to have strong controls in place and strong staff to manage the processes associated with AI. “You have to manage it [AI], you have to understand it, you have to put controls in place,” said Stone. “And you have to be willing to live with controls. If you don’t, it will just do things really fast – really wrong.”
Braga said AI was most useful when you narrow the scope to specific use cases: “I’m trying to analyse this dataset, or I’m trying to extract this bit of information, or I’m trying to make this prediction within this timeframe, then the methods can really help.”
She added that she was optimistic on the outlook for markets and geopolitics in 2024 despite turbulence in recent months.
“I think growth is going to be slower than the post-2008 crisis years but still positive. There are reasons to be optimistic about AI and technology, from slimming drugs and all that biotechnology to the treatments for various diseases,” she said.
“The shift to renewable energies is something that is going to create a lot of revenue and a lot of economic activity. I’m optimistic – though not ecstatic and jumping up and down. Valuations are high, but there’s no reason to think there’s a massive correction coming. A small stock market correction might come, but within the volatility of that is natural to the asset class.”
The transformational power of AI and Robotic Process Automation (RPA) was a recurring topic at the two-day conference, together with the complex global economic and geopolitical landscape and opportunities in alternatives.
That growing opportunity set was the subject of an expert panel discussing the findings of SS&C’s global LP survey, published in partnership with Private Equity Wire.
The eighth annual investor survey gathered insights from 251 limited partners (LPs) on trends in alternative investments, providing crucial insight for general partners (GPs) operating in a volatile market environment.
Bob Petrocchi, Senior Vice President and Co-General Manager of SS&C Intralinks, chaired a discussion of the findings of the survey and outlook for alternatives alongside John Donohoe, founder of Carne Group, Jeremy Hocter, managing director of Holland Mountain and Michael Stromsoe, head of investor relations at HSBC Alternative Investments.
The quartet shared insights on preferred asset classes in 2024, with private credit top of many investors’ agenda; expectations over fund transparency, reporting and ESG; GP technology capabilities and macro and sector outlooks.
Other speakers at SS&C Deliver Europe 2024 included Michael Vaughan, former England cricket captain, and Janet Henry, global chief economist at HSBC.
