Hedge Fund MingShi + AI = $1 Billion Blockbuster
Chinese AI-Powered Hedge Fund Nears $1 Billion
Shanghai-based hedge fund MingShi Investment Management implements artificial intelligence as its main strategy for making investments. The firm has already raised $600 million in the last four months and is moving quickly at secure another $400 million in the coming days. According to MingShi partner Stepham Zhou, “China has very good alpha, but it’s not low hanging,” referring to gains in excess of a market benchmark. “You need to do some serious research before you can get it.”
The firm is making sure that its quantitative methods and financial due diligence are in check before advancing with its investment strategy. Quantitative methods are growing in China which is assisting hedge fund giants such as D.E. Shaw and Two Sigma Investments. MingShi Investment Management utilizes its China Optima Master Fund to garner various strategies and variables for trading. This fund aims between 15 and 20 percent in returns while avoiding shorting stocks. The Chinese market makes shorting difficult, so MingShi takes advantage of trading index futures.
When referring to the Chinese markets, Zhou stated “If they trade more, that’s where mispricings and market inefficiencies become more obvious, and we’ll perform better than normal,” Chinese markets — despite some turbulence — have been growing in recent months. The CSI 300 index is up 13 percent with retail investments gaining traction.
MingShi Investment Management originated in 2010. Together, Yu Yuan and Robert Stambaugh — a University of Pennsylvania professor — founded the firm. The initial intention of the fund was to trade China’s A-share market. Stambaugh intended to involve the fund in quantitative strategies in China. This is mainly because of Chinese markets’ propensity to employ academic research and scientific components in the investment process. The company plans to grow its research department and to diversify its investment strategies. Industry observers are keeping a close eye on MingShi as AI-focused hedge funds continue to rise the tide for this next generation of investing prowess.
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