Self-Aware? World’s Largest Hedge Fund Shifts Strategy To Artificial Intelligence

– Self-Aware? World’s Largest Hedge Fund Shifts Strategy To Artificial Intelligence (ZeroHedge, Feb 28, 2015):

Despite warnings from the likes of Elon Musk and Stephen Hawking (and of course, Sarah Connor), Ray Dalio’s $165 billion AUM hedge fund Bridgewater will start a new, artificial-intelligence unit next month. Despite the “new normal”‘s total reversal of any and every historical rational trading pattern, the unit will attempt to create trading algorithms that make predictions based on historical data and statistical probabilities, as “machine learning is the new wave of investing for the next 20 years and the smart players are focusing on it.” Does this mean the talking heads of CNBC, with their ‘memes’, ‘myths’, and ‘mumbling’ rationales for it always being a good time to buy are now obsolete? Or did the market just become self-aware?

As Bloomberg reports, The world’s largest hedge fund manager is banking on machines…

Ray Dalio’s $165 billion Bridgewater Associates will start a new, artificial-intelligence unit next month with about half a dozen people, according to a person with knowledge of the matter. The team will report to David Ferrucci, who joined Bridgewater at the end of 2012 after leading the International Business Machines Corp. engineers that developed Watson, the computer that beat human players on the television quiz show “Jeopardy!”

The unit will create trading algorithms that make predictions based on historical data and statistical probabilities, said the person, who asked not to be identified because the information is private. The programs will learn as markets change and adapt to new information, as opposed to those that follow static instructions. A spokeswoman for Westport, Connecticut-based Bridgewater declined to comment on the team.

…

“Machine learning is the new wave of investing for the next 20 years and the smart players are focusing on it,” Dolfino said.

Some data scientists have been leaving firms outside of finance for larger paychecks at hedge funds, according to Dolfino. Quantitative firms have been on a winning streak and last year produced some of the highest returns in the $2.8 trillion hedge fund industry, by capturing price discrepancies across markets, making money from a plunge in oil prices and by purchasing government bonds that human traders dismissed.

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Is it just us or does it seem that everyone has forgotten the flash-crash and the quant crash before that when all the machines chased down the same rabbit holes?