Chinese firm does a U-turn on AI-driven fund just a day after touting its launch as an industry first
- An AI named Cybertron will now be deployed to help reshape the company’s investment methodology, Beijing Zhiyu Zhishan Investment Management said
- Cybertron will have the same access to data as the company’s research analysts, the hedge fund said
A Chinese hedge fund retracted a statement just a day after saying that it planned to use artificial intelligence (AI) to run one of its funds in what would have otherwise been a first in the nation’s 14 trillion yuan (US$2 trillion) industry.
“After discussion and reflection by our team, we think the true value of Cybertron is to rebuild and integrate Zhiyu Zhishan’s methodology of value-investing rather than trading,” said He in Friday’s statement. “In fact, Cybertron has already done the job of rebuilding and integrating the logic framework of our methodology. So starting today, we will use Cybetron directly in all of our funds to better embrace the AI era.”
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Even with this flip-flop, AI is showing signs of permeating into more sophisticated industries that require analysis, judgment and decision-making since the technology sparked a global frenzy after the launch of ChatGPT late last year. China’s stock markets may be ideal to test the ability of AI against human fund managers, as sentiment has turned fragile after the unravelling of the reopening trade, leaving traders with few investment opportunities.
At least three calls made to Zhishan Investment went unanswered.
“The U-turn means that the AI technology is still in the early stage of development,” said Dai Ming, a fund manager at Huichen Asset Management in Shanghai. “I have doubts about whether AI will outperform humans as fund managers. But as a trend, AI will be used more, particularly in research and quantitative investments.”
In its statement on Thursday, Zhishan Investment said Cybertron would have the same access to the pool of selected stocks as the company’s research analysts and that it would register Cybertron as a “new fund manager” with the industry association.
Founded in 2016, Zhishan Investment currently has 14 employees. Unlike mutual funds that accept public subscriptions, the Beijing-based firm only sells its products to high-net-worth investors.
The six funds operated by Zhishan have made an average return of 15 per cent over the past year, according to simuwang.com, which tracks Chinese hedge funds, beating a 12 per cent loss on the CSI 300 Index in the span. The total assets under the firm’s management stand at about 500 million yuan, the data showed.
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Chinese fund managers are grappling with a tough environment for stocks this year, as concerns grow about the sustainability of the nation’s post-Covid economic recovery and frayed ties between Beijing and Washington show no signs of calming.
The CSI 300 Index has erased the year’s gains and overseas traders sold a combined 12.1 billion yuan of onshore stocks in May – the second consecutive month of net selling. The plays on ChatGPT and low-valued state-backed companies are among the few trades that have shown resilience.
A set of draft rules in April also banned the use of AI if it generates false information, discriminatory content and content that infringes on personal privacy or intellectual property.
