Tencent: In Conversation with World Quantitative Hedge Fund Giant: Can AI Investment Replace Traditional Investment Approaches?

In an environment of persistent low market volatility, the hedge fund industry as a whole has been underperforming since the financial crisis. But Two Sigma, a New York based quantitative hedge fund that was set up in 2001, has become of the world’s largest quantitative hedge funds at an amazing rate. They managed $6bn in 2011, and the scale reached $50bn by the end of 2017, matching Renaissance, an established hedge fund.

Nobel Gulati, CEO of Two Sigma, tells Tencent Frontline that the company sees itself as a technology company and believes it can use scientific methods to make systemic investments. The makeup of the company’s employees supports this belief. Unlike traditional hedge funds, more than half of Two Sigma’s staff have no background in the financial sector and are often mathematics or computer science majors. These programmers or data scientists, who would otherwise have gone to Silicon Valley, work with people with financial backgrounds to try to find the undiscovered Alpha in the market – the excess returns relative to the broader market.

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