Future of Investment Management: Quantitative Models & Machine Learning

Quantitative and Machine Learning models are becoming extremely important to the asset management industry. Recent surveys have shown that investors have allocated more capital to strategies based on these models than any other hedge fund strategy in 2016. While Machine Learning models have made great strides they are in their relative infancy.  Their use raises a number of ethical and regulatory issues much like those than exist with the use of AI based technology in areas such as self-driving cars. This short paper seeks to illustrate the use of a Machine Learning model to answer a simple question – under what market environments will hedge funds outperform a 60% equity/40% bond portfolio? 

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