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Man – nil, Machine – 1
Imagination Technology’s over 60 per cent tumble this morning is normally the sort of thing short seller’s dreams are made of. The problem is there weren’t any human hedge fund managers with enough foresight to make that bet.
Instead the only hedge fund with a short position large enough to be publicly disclosed to the UK’s regulator was GSA Capital, a computer-driven quant fund based in London’s Mayfair.
What precisely drove GSA’s models to sell short 0.7 per cent of Imagination Tech shares is unclear but we can tell from earlier regulatory disclosures that other computer-driven funds such as WorldQuant and Systematica had been making the same trade last year before scaling back.
Notable by their absence in the disclosures were traditional funds that base their trades purely on human decision making.
So was GSA’s call artificial intelligence powered investment brilliance or just random dumb luck? We don’t know, but with the hedge fund’s profits on the trade likely to be in the millions of pounds there will certainly be some happy quants this morning.