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Algorithmic predictions and portfolio management

We think the robot future is going to be more disruptive than many think, but we also suspect that actual data-crunching plays only a small part in the career of a successful analyst.

There is some time spent crafting a compelling narrative around some basic assumptions, and then an awful lot more spent repeating that story ad nauseam on the phone, in reports, and in person.

Not to mention the part about getting to know people at the companies they cover. Top of UK brokers' list of problems at the moment are regulatory plans to make them charge their clients directly (as opposed to their clients' customers) for introducing them to the management of companies.

But, even if it is just about the value of good ideas - if you have some really good algorithms for, say, indexing websites or trawling Twitter, why would you advertise and sell them?

The world's most successful hedge fund strategy is both the most secretive and the one that you could never invest in: Renaissance Technology's Medallion fund. The fund ignores the mainstream finance literature, preferring to scoop up experienced cryptographers and mathematicians required to sign intimidating non-compete clauses, and it is willing to trade signals in the noise that work even if it doesn't understand why.


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