| Sumario: | The use of identical AI models across multiple asset managers has the potential to lead to herding behavior and create one-way markets. This could present certain dangers to the overall liquidity and stability of the system, particularly during periods of economic stress. The emergence of significant market volatility may be intensified by simultaneous large-scale buying or selling activities, thereby introducing new vulnerabilities into the system. There is a possibility that incorporating AI/ML and big data into investment strategies has the potential to reverse the prevailing trend of passive investing. If these innovative technologies demonstrate a consistent ability to generate alpha, indicating a cause-effect relationship between the use of AI and outperformance, it presents an opportunity for the active investment community to reinvigorate its approach and provide additional alpha opportunities to its clients.
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