Chinese hedge fund High-Flyer’s use of artificial intelligence in the trading market has spurred an AI arms race among mainland asset managers that could shake up the country’s $10 trillion fund management industry.
Apart from High-Flyer Capital Management deploying AI in its multi-million portfolio, it established China’s well-known AI start-up, DeepSeek. Its cost-effective large language model stunned Silicon Valley and challenged Western supremacy in the field.
DeepSeek lowers AI application obstacles for mutual funds
Following High-Flyer’s move, aspiring Chinese hedge fund managers such as Baiont Quant, Wizard Quant, and Mingshi Investment Management are intensifying their efforts in AI research. This follows efforts by several mutual fund companies that are rushing to incorporate DeepSeek into their investment workflow.
“We are in the eye of the storm” of an AI revolution, said Feng Ji, chief executive of Baiont Quant, which uses machine learning to trade markets with no human intervention.
Feng added that many fund managers viewed AI-powered quant firms with mockery or disbelief two years ago. However, he noted that today, those same skeptics could be out of business if they fail to embrace AI.
Most fund companies have focused on using AI to process market data and develop market signals instead of producing DeepSeek-like models.
DeepSeek has enhanced its system, making it more attractive to its users and effective. To illustrate, the firm announced on its X post that it had released supercharged reasoning power in its system, a transparent thought process in real-time.
In addition, on Feb. 26, DeepSeek offered its clients off-peak discounts as a market strategy to enhance users’ loyalty and attract more participants, solidifying its position as the key competitor in the AI market.
Moreover, fund managers will also face stiff competition from homegrown versions of U.S. systematic trading firms such as Renaissance Technologies and D.E. Shaw for “alpha”, or outperformance, to intensify efforts to reshape the hedge fund landscape.
Coding talent is in high demand. To illustrate, Wizard Quant posted a job opening last month for leading AI engineers and researchers for a lab to “reshape the future of science and technology.”
Furthermore, Mingshi announced that its Genesis AI Lab is hiring computer scientists to support research and investment.
Moreover, the competition for better trading strategies using AI is getting tougher. In a recent roadshow, asset manager UBI Quant revealed to investors that it had already set up an AI lab several years ago to explore the use of AI in investment and elsewhere.
AI requires huge computing power and high-performance chips, which are expensive to maintain and manage. The local authorities have therefore offered their support for AI development to solve this problem.
For instance, the government of the southern city of Shenzhen has vowed to raise 4.5 billion yuan, worth $620.75 million, to subsidize hedge funds’ consumption of computing power in support of their AI development.
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