At our Institute for Innovation Development Financial Services Innovation Forum in New York City on June 23, hosted by the Nasdaq, we asked Andrew Dassori, founding partner and chief investment officer of Wavelength Capital Management to share with us his experiences and personal journey in creating next-generation portfolio management tools and strategies utilizing artificial intelligence (AI) and machine learning. His firm has built a unique AI investment platform to work with advisors and money managers offering an artificial intelligence overlay for portfolio managers and hedge funds, a mutual fund and a robo-advisor .
Dassori: I am here to talk about my experience with artificial intelligence, its application to investing, and how I see it changing the future of investing.
My personal investment journey
I started investing at 18 when I opened an E-trade account and a friend's father lent me his copy of Ben Graham's Intelligent Investor. Before placing my first trade, I read it cover to cover and tried to draw out all the investment logic it contained. This wasn’t easy, but I kept at it and eventually had an actionable set of logic for my own investing.
Graham was brilliant and he had to be. Not only did he establish a set of investment principles that remain relevant today, he also maintained and processed them in his head to make investment decisions. This highlights a key difference between investing intelligently back then versus today -- he invested without the advantage of a computer to maintain his logic and execute his trades. This advantage has grown from its roots in codified investment logic to more advanced predictive analytics and forms of artificial intelligence.
How do you keep up with the volume of data, speed and new opportunities?
Investment processes like Graham's are powerful, as they've been tested continuously by time. What has changed most is the way they can be applied given an ever-increasing volume of data. There are now hundreds of thousands of securities in markets across the globe, and the speed at which we access data has increased meaningfully. The value of different datapoints also changes over time, so while still applicable, the opportunity to apply these concepts is an expanding and moving target. As a result, it has become more difficult to manage an investment process in your head. We are fortunate that the explosion in data has been met with an explosion in computing power which far surpasses the capacity of any human brain.
Much of this was already in motion when I began investing, so I recognized a changing opportunity set from the start. Codifying logic like Graham's lets investors keep up with change and leads to artificial intelligence in its base form as a rules-based system.
How did you build your investment process?
In engineering, something repeatable that can also adapt to new environments, there are many basic parallels to the process of building an engine. Our investment engine runs on data which it processes through rules. These rules are codified as parts in the engine that can be thought of as if-then statements. Each rule is tested for consistency over time and maintained using a computer. Just as an engine's capacity is measured in horsepower, the power of our investment process comes from the logic of many minds working together. As a result, this engine can quickly analyze huge amounts of data using far more logic than what is possible to keep in one’s head.