Magnetar Capital, the $18 billion hedge fund firm, will shun human analysts for its newest offering and instead deploy hundreds of AI bots to research stocks.
The firm’s AI technology seeks to replicate the depth of research and analysis usually provided by fleets of humans, according to people familiar with the matter, who declined to be identified because the information is confidential. The bots will scour the investing universe for ideas, analyze stocks, make recommendations and forecast trends, the people said. Humans will make the final decision on any trades.
The vehicle, which is expected to launch later this year, is the latest example of how the hedge fund industry is rushing to leverage AI technology to enhance, or replace, human talent. Traditionally, new funds debut with teams of analysts to dig into bottom-up research. By contrast, at Magnetar, humans will largely focus on the fund’s AI infrastructure.
A representative for Magnetar declined to comment.
The move follows a similar initiative earlier this year by former Coatue Management portfolio manager Rahul Kishore, who debuted a fund run by three humans and an AI bot named Eve.
Still, the jury appears to be out on whether AI can achieve one of the most elusive goals in finance: beating the market. In recent contests involving eight major frontier AI systems, most lost money.
Magnetar’s new fund is the brainchild of Trevor Mottl, the firm’s head of AI Quant, who built its infrastructure. The fund will make more bullish bets than bearish ones and will focus on buy-and-hold positions, the people said. A smaller sleeve of the portfolio will seek to find market signals milliseconds faster than peers. The AI technology will allow the fund to greatly ramp up a type of analysis called signal processing, which separates valuable information from noise to identify potential pricing patterns.
Mottl’s AI infrastructure and technology is complex and capital-intensive, the people said. He has multiple Nvidia Corp. servers — high-performance computers that cost millions of dollars —running continuous workloads. He’s also developed an advanced inference layer, which is a system that acts like an orchestra conductor, directing different AI agents to perform specific tasks at various times.
Based in tech-centric Menlo Park, California, Mottl spent seven years at Fusion Fund and was previously an AI portfolio manager for Walleye Capital and Lazard Asset Management. Earlier, he was Balyasny Asset Management’s head of long-short equity risk and a portfolio manager at Man Group Plc.
While this is Magnetar’s first AI-driven vehicle, in 2024 the firm launched its first venture fund that focused on backing generative AI companies. Magnetar was founded in 2005 by Alec Litowitz and Ross Laser. The firm mostly invests in alternative credit and also has a quant business that makes equity, merger arbitrage and statistical arbitrage bets.
Written by: Hema Parmar @Bloomberg
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