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SBAI Holds Big Data And Artificial Intelligence Roundtable

The Standards Board for Alternative Investments (SBAI) held a “Big Data and Artificial Intelligence (AI)” roundtable in New York to discuss the current state of innovation in this area as well as the legal and compliance challenges related to new data sources.   

The SBAI roundtable was held at Winton’s New York office and brought together leading practitioners from the US, Canada, Europe and China, including representatives from Blackrock, BlueMountain Capital, Dechert, Hivemind, Jasper Capital International, Man Numeric, Periscope Capital and Winton Group.

Thomas Deinet, Executive Director of the SBAI said: “Big data and AI are playing an increasing role in informing investment decision-making, both in quantitative and fundamental investment strategies.  This is an area of fast innovation and it is important that firms understand potential compliance risks and pitfalls.”

Key observations from the roundtable included:

  • Despite the name “Artificial Intelligence” implying that computers can operate flexibly on their own, at this point, AI programmes can only do specific, narrow tasks. Humans are required to direct the programmes and judge whether the output makes sense.
  • Assembling and cleaning alternative data sets is still labour intensive, requiring a combination of human judgement and computer processing.
  • AI itself is not new; what has changed is the amount of data and computing power. This is allowing managers to rapidly process unprecedented amounts of new information.
  • Explaining the attribution from AI-directed investment strategies can be challenging, because trading programme decisions can blur the lines between fundamental, technical and macro analysis.
  • When acquiring data sets from vendors, it is critical to perform thorough due diligence to ensure the data does not violate personal privacy and that the source of the data has the legal right to sell it.  Managers should perform an end-to-end analysis to ensure they understand every step of the process used to assemble the data.
  • Some companies are selling data arising from their business, and managers should ensure that the data does not inadvertently contain insider information.
  • Regulators are taking an interest in Big Data and AI and educating themselves.  During regular exams they are likely to start exploring what data sets a manager uses and how the manager ensures that using this data does not violate securities regulations.

“The SBAI has been at the forefront of this discussion, bringing together managers and investors to look into the intersection of technology and alternative asset management,” said Deinet.  “We will continue to explore Big Data and Artificial Intelligence at our global roundtables, providing a forum for industry participants to advance their knowledge and share best practices.”