Billionaire Ray Dalio’s hedge fund manages $US160 billion in assets, which to put in perspective, is 8.5 times more than that managed by Bill Ackman’s Pershing Square Capital Management.
Dalio told Ackman at the Harbour Investment Conference earlier this month that AI already factors into Bridgewater’s investment strategy. He explained:
I can be short or long anything in the world, and I’m short or long practically everything. I don’t have any bias, so I do it in a very fundamental way… we use a lot of artificial intelligence type of approaches to think about portfolio theory. I use a lot of financial engineering to basically take a whole bunch of uncorrelated bets…
Bloomberg reports that a source close to the matter says the new AI team will launch next month with about six employees led by senior technologist Dave Ferrucci, quietly hired from IBM in late 2012.
Ferrucci gained recognition as the lead researcher of Watson, the AI engine that became a “Jeopardy” champion.
Ferrucci told the New York Times in 2013 that before leaving IBM, he was working on WatsonPaths, which took a different direction from the traditional Big Data approach. “
“The Big Data formula, he noted, has proved to be ‘incredibly powerful’ for tasks like natural-language processing — a central technology behind Google search, for instance,” the Times wrote. “WatsonPaths, by contrast, builds step-by-step graphs, or paths, that trace possible causes rather than mere statistical correlations.”
It’s the approach Bridgewater hired him for to stay on top.
“Machine learning is the new wave of investing for the next 20 years and the smart players are focusing on it,” Gustavo Dolfino, CEO of recruitment firm WhiteRock Group told Bloomberg. Investment firms like Two Sigma Investments and Renaissance Technologies have been expanding their AI teams in recent months.
It also works with Dalio’s management philosophy, which he describes in the 120-page manual he gives to every Bridgewater employee. Dalio writes that a manager should see their team as an autonomous “machine” whose function is to achieve its manager’s goals.
A Bridgewater representative told Business Insider that the hedge fund is not ready to comment but will update us if that changes.
NOW WATCH: Ideas videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.