Man Group Hedge Funds Are Said to Embrace Machine-Learning Algos

(Bloomberg) -- Man Group Plc is expanding the use of algorithms that evaluate risk, pricing and timing in financial markets and learn from their mistakes, according to a person with knowledge of the matter.

The investment firm, which until recently only deployed machine-learning models at its AHL Dimension fund, is now using them on three more money pools, the person said, asking not to be identified because the information is private. The four funds collectively managed $12.7 billion at the end of March. A spokeswoman for Man Group declined to comment.

The world's largest publicly traded hedge-fund firm is trying to bolster returns as improving artificial-intelligence techniques, faster and cheaper computing power, and an increasing supply of data open up opportunities. The use of machine-learning techniques could be a way of achieving that for London-based Man Group, which manages nearly half of its $88.7 billion in assets in quantitative money pools.

While such techniques have yet to prove themselves over time and on a broader scale, many hedge funds are scrambling to harness the techniques that have propelled money managers such as Two Sigma and Renaissance Technologies even as returns lag behind booming stock markets.

The $5.2 billion AHL Dimension fund, which had been using the techniques since 2014, gained almost 15 percent in the three years through June, according to data from Man Group's website. The $4.2 billion AHL Alpha and $3.3 billion AHL Diversified, which have also started using the models, were up 13.1 percent and 7.6 percent, respectively, during the period. The models are also used in the Man AHL Trend Alternative fund. All four funds use a range of algorithms to make money.

Man Group recently reshuffled the senior management at its AHL division. It also shut a “quantitative incubating” unit to focus on other strategies and hired the head of machine learning for its GLG unit that uses fundamental analysis to pick stocks and bonds.

To contact the reporter on this story: Nishant Kumar in London at nkumar173@bloomberg.net.

To contact the editors responsible for this story: Neil Callanan at ncallanan@bloomberg.net, Andrew Blackman, Paul Armstrong