The Growth and Performance of Artificial Intelligence in Asset Management

Authors

Shuang Chen, University of Melbourne - Department of FinanceFollow
Clemens Sialm, University of Texas at Austin - McCombs School of Business; National Bureau of Economic Research (NBER)Follow
David X Xu, Southern Methodist University (SMU) - Finance DepartmentFollow

Publication Date

8-30-2025

Abstract

This paper examines AI adoption in asset management and its investment implications. We document that AI-driven investing is concentrated among hedge funds, particularly those employing systematic diversified macro strategies. AI funds significantly outperformed non-AI hedge funds on a risk-adjusted basis in early years, but this outperformance declined over time and mostly disappeared with the growth of AI-driven investing. Adviser heterogeneity does not fully explain the performance of AI funds, as they outperform their non-AI sibling funds. We also find that AI funds exhibit greater comovement than non-AI funds. Our findings highlight both the alpha-generating potential and the limitations of AI as a source of investment performance.

Document Type

Article

Keywords

Artificial Intelligence, Asset Management, Investment Advisers, Hedge Funds

Disciplines

Finance

Source

SMU Cox: Finance (Topic)

Language

English