Financial giant BlackRock CEO Larry Fink is surprised at the attention his reshuffling of operations has received.
He states that at present “machines do not outperform human analysts” but at the same time he is increasing BlackRock’s reliance on computerized data gathering and processing and its role in investment decisions. His aim is to improve objectivity, reduce costs, to lower fees, and to increase the fund manager’s already impressive competitive edge.
We are not substituting stock-picking machines for humans, says BlackRock’s Larry Fink
Right now, machines do not outperform human analysts, Fink said.
Against the backdrop of a fiercely competitive trading environment, BlackRock said last week it is overhauling its active management business by cutting jobs, reducing fees and increasing its use of computers to pick stocks.
BlackRock, the world’s biggest money manager, has $5.1 trillion in assets under management.
Fink said on “Squawk Box” he was surprised by the media coverage of the reshuffling because it’s only a small part of BlackRock’s business.
“We are reorienting some of the humans’ jobs in terms of doing more data science and data analysis,” Fink said. “We’ll have the same amount of employees in our equity division a year from now than we do today.”
The move to incorporate more computing power into investment decisions is a recognition that there are so many sources of information that need to be analyzed quickly, Fink said.
“Very fast computers [can] analyze blogs, analyze all the feeds of the internet to come up with different nuances, different fields of information,” he said. “It requires model analysis and deep-data analysis.”
BlackRock is researching ways to use artificial intelligence, Fink said.
Fink said he believes in active management, but he personally invests in index funds because of all of the investment restrictions he is subject to as chief of BlackRock.
BlackRock has also been aggressive in lowering fees, Fink said.
His strategy is sound, but the advent of revolutionary computerized trading of stocks, has not eliminated the need for human intervention. Nor is it likely that it will, when the outcome of widespread unrestrained computer trading has been to trigger catastrophic market collapses.
The computer trading software of the future must take into account a much more comprehensive range of information other than just historical trading data to which all computers will respond in the same way.
At present experienced traders have an edge that computers lack. They have the capacity to anticipate and lead market movement, rather than to just follow other market participants lemming-like in a mad rush to sell or buy stock.
Categories: Trading opinion