Chinese Fund Managers Beat High-Flyer’s Path to AI
SHANGHAI/SINGAPORE (Reuters) – The burgeoning use of artificial intelligence by Chinese hedge funds is igniting an “AI arms race” within the country’s $10 trillion fund management industry, raising the stakes for both established firms and newcomers.
One firm, High-Flyer, has been a pioneer in this area. High-Flyer not only integrated AI into its multi-billion dollar portfolio but also created DeepSeek, an AI start-up developing a cost-effective large language model that has garnered attention for its capabilities, even in Silicon Valley.
This has prompted a wave of investment and research. Asset managers such as Baiont Quant, Wizard Quant, and Mingshi Investment Management are actively expanding their AI research, while a multitude of mutual fund companies are incorporating DeepSeek into their investment strategies.
“We are in the eye of the storm” of an AI revolution, according to Feng Ji, chief executive of Baiont Quant. He added that the skepticism surrounding AI-driven investment approaches is rapidly fading.
Most funds are employing AI to analyze market data and generate trading signals tailored to their investors’ risk profiles.
Competition is expected to intensify in the quest for “alpha” – or outperformance – as Chinese firms begin to emulate U.S. systematic trading models. Wizard Quant has actively sought AI researchers and engineers to advance their technological capabilities.
Mingshi’s Genesis AI Lab is also hiring computer scientists to support research and investment and UBI Quant told investors that it had established an AI lab several years ago to explore AI’s potential in investment and other applications.
The demand for advanced AI in trading is driving up the need for significant computing power and high-performance chips. Local authorities are responding with financial incentives to help hedge funds. For example, the city of Shenzhen plans to invest 4.5 billion yuan ($620.75 million) to subsidize the computing costs of hedge funds for AI development.
DeepSeek’s Impact
China’s mutual fund industry is also moving rapidly to harness the potential of AI. Over twenty retail fund companies, including China Merchants Fund, E Fund, and Dacheng Fund, have adopted DeepSeek.
Hu Yi, vice general manager of intelligent equity investment at Zheshang Fund Management, highlighted that the open-sourced, low-cost nature of DeepSeek has made AI applications more accessible. Zheshang Fund is building AI agents to enhance the efficiency of research and investment.
Larry Cao, Principal Analyst at FinAI Research, stated that DeepSeek has “levelled the playing ground for Chinese fund managers, which are smaller than their U.S. counterparts.”
Baiont’s Feng also noted that the advancements in AI present opportunities for new fund managers, potentially allowing them to challenge larger established firms.
“A seasoned fund manager may have accumulated 20 years of experience, but with AI, one can acquire that experience in two months using 1,000 GPUs,” said Feng. His five-year-old fund currently manages 6 billion yuan.
($1 = 7.2493 Chinese yuan renminbi)
(Reporting by Samuel Shen in Shanghai and Vidya Ranganathan in Singapore; Editing by Christopher Cushing)
