Hedge funds are investing heavily in artificial intelligence (AI), and managers and their clients expect it to have a significant impact across their operations. However, there are some doubts about whether the beneficial effects of AI can live up to soaring expectations.
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The growing influence of AI on hedge fund operations
AI has huge potential across a range of hedge fund operations, from generating marketing content to swiftly analysing billions of data points and thereby assisting in portfolio construction.
Positive response
That’s certainly the view of the respondents to the survey IG Prime conducted for its 2025 State of the Hedge Fund Industry report. Around half of the managers who responded to our survey thought that the impact of AI in the next three years would be significant, while a further 17% believed AI would be a game changer. Only 7% thought AI would have no or very little impact.
Our respondents also thought AI would have an impact on a wide range of their business activities. AI has significant potential to reduce human input in laborious, time-consuming areas such as data processing and analysis, but a majority of the survey respondents also believed it would help with predictive insight, with AI able to identify trends and anticipate market movements.
In addition, as IG Prime reported in the white paper, AI has the potential to optimise portfolio management. In June 2024, for example, Castle Ridge Asset Management, an AI-driven hedge fund manager, launched a multi-strategy AI hedge fund powered by WALLACE, its proprietary AI platform, capable of handling a quadrillion calculations per second. The firm claims that AI optimises investment strategies across various asset classes, with the target of improved diversification and performance metrics.1
Which areas do you think will be most affected by AI in the coming year ?
It’s a similar story among the institutional investors who responded to our survey. AI is expected to hit a broad range of their activities, including trading, where AI enables advanced techniques that can execute trades at optimal times and prices, maximising returns.
Which areas of investment management do you think will be most affected by AI in the coming year?
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