Rosetta Analytics co-founder Julia Bonafede compares deep reinforcement learning models to established quantitative hedge funds.
Insight
Bonafede: Only reinforcement learning can dynamically moderate portfolio risk
“As it learns to maximize the reward, the model, I don't mean to give it human characteristics, but it will moderate risk because it can see that taking full advantage of the underlying patterns may not lead to the best reward, and there's No other optimization…”
Opinion
Bonafede: Traditional investment processes fail to justify active management fees
“If you think about how rudimentary the other processes are that literally trillions of assets are invested in, at this point in this seat, I'm not quite sure why everybody feels so comfortable with their current frameworks. Because again, you could index and p…”
Opinion
Bonafede: Most institutions cannot simply index their portfolios
“Jack Bogle had a view of Really, you should index everything, and over the long term, you'll get there at much lower fees, and everything will compound, but the reality is, is that most institutions can't invest that way for just by their very structure, or by…”
Opinion
Bonafede: Peer group benchmarking is consultants' biggest disservice
“Probably the biggest disservice that consultants have ever done is putting everybody in peer groups so that they compete against each other, even though that their liabilities are completely different and their circumstances are very different.”
Opinion
Bonafede: The active fixed income business model is in trouble
“So how do fixed income managers actually charge active fees on top of duration risk and low yields, where investors are going to be looking at most of their portfolios, and you're earning close to zero, and on a real basis, you're earning negative. So that who…”
Prediction Not checkable as stated
Bonafede: Asset management must undergo a major structural correction
“In my view, portfolio, the asset management industry is really has to go through a big correction before any of this will shake out, but you've seen unprecedented mergers and acquisitions.”