AI fund manager predicts greater volatility, investment opportunity

Stefan Tittel, CEO of AI-driven investment firm Quantumrock, said that AI and machine learning will have a great impact on returns this coming year. He remarked that 2021 will likely be another year of increased volatility. “Machines will continue to be on the lookout for opportunities throughout all points of the market cycle,” said Tittel. “Uncertainty is the most significant challenge facing investors. With AI, this uncertainty is handed to an algorithm where the predictions and timings are completely automated.” Perhaps the greatest strength of AI is that emotional and cognitive biases can be removed over time. Last year Quantumrock’s Volatility Special Opportunities Program returned 30.9%. In 2020, additional AI investment managers have come to the fore and Tittel remarked that there is a growing appetite for these types of strategies on the part of investors as well. In the spotlight are systematic strategies. The Munich-based firm was on track for even greater returns with year-to-date gains of 37% through July. And earlier in the year, the $50 million strategy took in $500 million of institutional capital as returns of the systematic multi-strategy portfolio attracted attention with its artificial intelligence-sourced investments. “Developments in natural language processing, in particular models based on transformers, are increasingly helping systematic investors to capture and process multiple sources of data (textual, image and audio) with a higher degree of automation by broadening the reach and improving efficiency,” Tittel added. “Meanwhile, white-boxing machine learning models are helping to enhance human understanding of algorithms through transparency and accountability.” The Quantumrock Volatility Special Opportunities Program (VSOP) is a systematic multi- strategy approach that combines the advantages of balanced portfolio long-term risk-returns with the short-term hedging and alpha capabilities of a volatility overlay portfolio. In total, the portfolio shows a lower risk profile than the S&P 500, and VIX long strategies reduce the beta to the S&P 500 by hedging the tail risk.

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