Kavout CEO Alex Lu speaks at the Financial and Technology Alternative Investment Global Financial Summit
On Tuesday July 30, 2019, Zhonngjin Puhui Ltd., Beryl Consulting Group LLC and the Central University of Finance and Economics hosted the Alternative Investment Global Financial Summit.
The two-day summit brought together over 100 attendees from noted groups such as PICC, Group, BOC International, Harvest Fund Management, JP Morgan Chase, MSCI and S&P Global to discuss emerging financial technology and technology trends for alternative investments and alternative data.
Kavout CEO Alex Lu was one of five invited panelists for the discussion “The Application of Alternative Data, Machine Learning, and Artificial Intelligence in Wealth Management.” Hosted by CEO of Beryl Consulting Group LLC, Vidak Radonjic, the panel focused on the use of artificial intelligence and machine learning to mine Alpha signals. The goal of the session was to educate the audience on the application of machine learning and artificial intelligence for the investment and wealth management community.
The panel opened with Alex sharing his thoughts on how alternative data, machine learning, and artificial intelligence can be leveraged for portfolio allocation, optimization, risk management, and ultimately improve returns.
“Finding excess alpha is a problem that every single investor faces. This is because of the amount of data available, and the competitive landscape among both data vendors and institutional investors. There are more than 50,000 stocks in the global financial market, with about 500 to 1,000 stocks in the United States with a higher liquidity. Here in China we focus on just the CSI 300 index, which is daunting enough. Combine these numbers with all the hedge funds and investment institutions that are competing in the same market across the globe. And then you realize that for the past forty years, investors have discovered over 400 factors and signals that can affect a stock price. The ability to compute this information manually is just not humanly possible.”
Kavout has a long history in big data and artificial intelligence (AI). The strength of Kavout is their applications of machine learning methodology and ranking algorithms that analyze diverse datasets. Their ML model allows for continued learning, meaning that they are able to take in both unstructured and structured data to generate Alpha signals.
For example, the information in a tax bill can be generally seen as full of noise and with little useful data. However, by using AI methods proven successful by companies such as Baidu, Microsoft and Google, the system can cut through the noise and mine useful information, where traditional quantitative and qualitative methods have failed to do so.
The application of AI for equity investment and stock analysis is not a novelty. Lu referenced that BlackRock, the world’s largest asset manager, recently invested about $27 billion in machine learning funds. This is a key indication that AI is gaining traction in the investment community, which presents a good opportunity for data vendors like Kavout.
When asked about the similarities and differences between Europe, United States and China, Alex made a comparison between the United States and China, and how they are more similar than most realize. He pointed out that all investors, whether in New York, London, or China, will face the same problem – to get smaller performance drawdown. However, when it comes to differences, Lu pointed to the level of acceptance of data. He indicated that fund managers in China are more hesitant than those in New York or London to AI and machine learning in their models, who generally are looking for new ways to make more money.
Alex was then asked the question about the sheer number of factors and signals available, He stated that due to the massive amount of data available, it is extremely difficult to ascertain anything useful using traditional methods. However, machine learning has the unique ability to identify patterns and build useful analyses for investment purposes.
The opportunities for cloud computing, big data, and natural language processing is boundless in the asset management field, helping a community that is inundated with massive amounts of data. Kavout’s role in this continues to be mining the most valuable information, such as alpha signals using cutting-edge technology, and providing unique data products such as K Score, portfolio and asset allocation services for institutional investors.