Robeco harnesses AI to elevate investment strategies, builds on 25 years of quantitative expertise

Quant strategies have always been driven by data and technology – and AI is the latest chapter in that evolution. Techniques like ML and NLP, long studied at Robeco, now operate at unprecedented scale and sophistication. ML uncovers complex, non-linear patterns and enhances signal generation, while NLP interprets nuanced sentiment from textual and audio data, enriching market insights.

These advances exploit alternative data – massive, fast-moving streams from sources such as credit card transactions and satellite imagery. Incorporating AI into investment processes offers both quant and fundamental investors the advantages of faster speed, broader sources of information and better information processing. But it also necessitates being purposeful, clear-headed and transparent when using AI in quant investment processes.

Deploying AI as a driver

With vast new data and computing power readily available, quant investors today can access sources and techniques that were out of reach just a decade ago. Robeco’s quant team, for example, has expanded its toolkit to include additions such as sector-specific signals and novel alternative data sets. To ensure quant strategies evolve in a robust, evidence-based manner – preserving the reliability investors expect – Robeco has developed dedicated AI-driven strategies within its incubator, leading to the launch of innovative next-gen strategies.

Targeting AI investments

AI has also emerged as a dominant theme in investment portfolios. With its seemingly infinite capacity to take on diverse tasks from computer coding to drug development, AI has been heralded as the next era in technology, much like the personal computer, the internet and the smartphone. While the impacts of such technological shifts are broadly felt, there are typically fewer beneficiaries.

With this in mind, Robeco focuses on identifying providers of foundational technologies, and those adopting the technology within the core of their business, to create value.

These opportunities require careful analysis – by examining the proprietary data, AI talent and defensible strategies to monetise AI capabilities behind such claims. Through this, Robeco aims to separate the hype from the reality and potential.

AI “washing”

Importantly, Robeco treats AI as a means to enhance its investment process. A lot of “AI washing” is taking place – in which companies claim AI involvement so that they appear to be cutting edge. That is why it is crucial that every new technique or signal is rigorously backtested. Investors should not incorporate an AI-based idea just for the sake of it; at Robeco, many promising signals have been tested and discarded because they did not add value beyond its existing models.

Ultimately, AI investing is a long-term strategy and its impact on the economy is still in its early stages. There will be volatility as regulations become clearer, competition increases and advances in AI capabilities continue. By continuing to use AI to improve investment decisions, developing new, innovative strategies and investing in this new tech, Robeco aims to deliver the benefits of this powerful tool to its clients. For investors and AI, the future is bright.

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Alpha refers to the excess return of an investment relative to a benchmark index and is a measure of performance.

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