The C$23 billion Canadian fund, OPTrust is embracing the power of technology to improve investment outcomes. Wei Xie explained the fund’s focus on two subdomains of machine learning – reinforcement learning and uncertainty modelling – and how they can be used together.[vc_quotes layout=”accordion” quotes=”%5B%7B%22name%22%3A%22Wei%20Xie%22%2C%22job_role%22%3A%22Co-head%20of%20multi-strategy%20investing%20team%2C%20OPTrust%20(Canada)%22%2C%22content%22%3A%22As%20a%20senior%20professional%20with%20a%20unique%20blend%20of%20experience%20across%20investment%20domains%2C%20Xie%20is%20currently%20focused%20on%20novel%20investment%20strategies%20including%3A%20digital%20assets%20(crypto%2C%20blockchain)%2C%20machine%20learning%20enabled%20liquid%20strategies%2C%20private%20and%20public%20crossover%20strategies.%20As%20co-chair%20of%20the%20incubation%20portfolio%20investment%20committee%20(IPIC)%20with%20a%20mandate%20to%20develop%20and%20implement%20novel%20strategies%20designed%20to%20accelerate%20investment%20capabilities%20at%20OPTrust.%5CnWith%20a%20breadth%20of%20investment%20experience%20spanning%20liquid%2C%20illiquid%20and%20innovative%20strategies%3B%20across%20traditional%20and%20alternative%20asset%20classes%3B%20he%20has%20a%20broad%20investment%20management%20skillset%20including%3A%20investment%20strategy%2C%20portfolio%20construction%2C%20macro%2C%20strategic%20relationship%20management%2C%20AI%2FML%2C%20governance%20design%20and%20stakeholder%20management.%22%2C%22image%22%3A%2244376%22%2C%22linkedin%22%3A%22https%3A%2F%2Fwww.linkedin.com%2Fin%2Fwei-xie-4b41ba16%2F%3ForiginalSubdomain%3Dca%22%7D%5D” title=”Speakers” el_class=””][vc_quotes layout=”accordion” quotes=”%5B%7B%22name%22%3A%22Amanda%20White%22%2C%22job_role%22%3A%22Director%20of%20institutional%20content%2C%20Conexus%20Financial%20%20(Australia)%22%2C%22content%22%3A%22White%20is%20responsible%20for%20the%20content%20across%20all%20Conexus%20Financial%E2%80%99s%20institutional%20media%20and%20events.%20She%20is%20responsible%20for%20directing%20the%20bi-annual%20Fiduciary%20Investors%20Symposium%20which%20challenges%20global%20investors%20on%20investment%20best%20practice%20and%20aims%20to%20place%20the%20responsibilities%20of%20investors%20in%20wider%20societal%2C%20and%20political%20contexts%2C%20as%20well%20as%20promote%20the%20long-term%20stability%20of%20markets%20and%20sustainable%20retirement%20incomes.%20She%20is%20the%20editor%20of%20conexust1f.flywheelstaging.com%2C%20the%20online%20news%20and%20analysis%20site%20for%20the%20world%E2%80%99s%20largest%20institutional%20investors.%20White%20has%20been%20an%20investment%20journalist%20for%20more%20than%2020%20years%20and%20has%20edited%20industry%20journals%20including%20Investment%20%26%20Technology%2C%20Investor%20Weekly%20and%20MasterFunds%20Quarterly.%20She%20was%20previously%20editorial%20director%20of%20InvestorInfo%20and%20has%20worked%20as%20a%20freelance%20journalist%20for%20the%20Australian%20Financial%20Review%2C%20CFO%2C%20Asset%20and%20Asia%20Asset%20Management.%20She%20has%20a%20Bachelor%20of%20Economics%20from%20Sydney%20University%20and%20a%20Master%20of%20Arts%20in%20Journalism%20from%20the%20University%20of%20Technology%2C%20Sydney.%20She%20was%20previously%20a%20columnist%20for%20the%20Canadian%20publication%2C%20Corporate%20Knights%2C%20which%20is%20distributed%20by%20the%20Globe%20and%20Mail%20and%20The%20Washington%20Post.%20White%20is%20currently%20a%20fellow%20in%20the%20Finance%20Leaders%20Fellowship%20at%20the%20Aspen%20Institute.%20The%20two-year%20program%20consists%20of%2022%20fellows%20and%20seeks%20to%20develop%20the%20next%20generation%20of%20responsible%2C%20community-spirited%20leaders%20in%20the%20global%20finance%20industry.%22%2C%22image%22%3A%2243061%22%2C%22linkedin%22%3A%22https%3A%2F%2Fwww.linkedin.com%2Fin%2Famanda-white-101a7515%2F%22%7D%5D” title=”Moderator” el_class=””][vc_empty_space height=”10px”]
Key takeaways
The C$23 billion Canadian fund OPTrust is embracing the power of AI to improve investment outcomes via two new strategies on re-enforcement learning and uncertainty modelling.
The pension funds hopes to deploy the strategy at a total fund level and combine it with the equity beta portfolio to create a risk reduced equity allocation.
At a high level, AI is used to better understand and inform risk in a scalable approach.
AI is challenging for investors because of the need to hire people with the right skills. It also involves investment in a data supply chain.
Using AI in risk management is scalable across different types of strategies and doesn’t need exotic data as it mainly involves working with price data.
OPTrust sought to design a process that used AI to discover when assumptions might be ineffective due to the function of changes in the market.
Reinforcement learning gives greater insight into the factors driving price action. Here AI allows investors to detect the non-linear impacts on prices that humans struggle to track.
The big difference between the vaccine rollouts and the scale of the stimulus measures across the world could result in a K-shaped global economic recovery, with much of the developed world booming but poorer countries continuing to struggle. However the
Farouki Majeed is worried about the future. His concerns are centred around the implications of the enormous US federal debt; the global competitiveness of the US and Chinese economies; inflation; and the potential erosion of the value of the US dollar.
Should we be thinking about investment differently in 2021? Certainly, there appears to be cause for challenge of current thinking on inflation rates and the rise of China in the new world order.
2020 was by just about any measure, unprecedented. Market volatility, regulatory change and the need to make decisions quickly – but largely remotely – put more emphasis than ever on dynamic and effective decision-making in pension investment committees. It was a true test of robust governance.
The COVID crisis and the volatility of 2020 has revealed some lessons for the investment team at Coal Pension Trustees (CPT). It has taken a more top down view of managing its portfolio looking at economic themes, risk exposures, cashflows and its manager roster holistically. Amanda White talks to CIO Mark Walker about where it sees return opportunities, the prospect of manager consolidation and how it has embraced technology for better investment practices.
The challenge of matching long-term investing with development needs in emerging and developing countries is discussed by Georg Inderst who suggests it might be time for asset owners to look at their role in blended finance.
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