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One of the most important challenges for traders and funds is losing an edge. In the promised article “The Lowest Hanging Fruit 2,” I describe how to think about maintaining and expanding an edge in a small fund.
This is one of the hottest topics in retail and fund trading at the moment. It runs from necessity, traders are increasingly noticing that their systems no longer work, do not work like they used to, there is no liquidity (that is, entering a position triggers strong counter movements).
The solution to this problem is the strategy used by the largest and richest funds: building an advantage along the entire investment process. I will write more about this in the future, because the automation of trading and the increased use of AI tools will further magnify this problem.
As an aside, I will only add that, as if imperceptibly, the model of a profitable fund has changed and retail traders have arrived with powerful competition. A fund that uses new solutions last year earned $16 billion in a tough market, when the 20 most profitable funds earned $22 billion.
This is no mistake, one fund out of the 20 (Citadel) earned more than 72% of what the top 20 earned. I will prepare an article about this soon, this is something that will stay with us for a long time.
After the success of the Citadel model, the entire investment industry will begin to emulate it. Within four to five years, the new model may appear in 40-50% of funds. This model is winning the race for clients’ cash. It gives stable, high returns with less risk. The new teams have better strategies, a more complete picture of the market, and can find and exploit the best signals to the maximum faster. As a result, little liquidity is left for the remaining market players to exploit.
The hottest topic in the world at the moment is ChatGPT. I did an interview with it on how we can use it in making investment decisions. It’s the first publicly available AI with which to conduct conversations. A real breakthrough, on par with the previous three industrial revolutions.
Today, we are not yet fully aware of how much this invention will change us, business, finance, our societies and countries. AI will go through several phases of development (there will be much about this in future magazines): the first phase is AI as a tool (current), the second is AI as a collaborator. In the spirit of the latter approach, the interview is done, let’s start getting used to it.
ChatGPT appeared somewhat by surprise. I didn’t think it would come so soon. I encourage you to play with it, it’s not every day you have to deal with a ten billion dollar toy. In less than an hour he gave me an interview of nearly 30 pages (not all of it went into the magazine, the whole thing is in a supplement).
Also related to Chat is another article, “ChatGPT: A new gold rush is starting in the US…” In it, I describe the story of how, by complete coincidence, I took part in a competition for a US DARPA project.
The consequences of what is currently happening in the US are powerful: they will change the way we learn, educate and retrain for new jobs. The project itself is building a completely new service for training employees using AI tools. This is something, that is currently being built and will be talked about in a few years. years. I had the unique opportunity to accompany the idea and the project from the very beginning.
Dariusz Swierk, PhD, Chief Editorial