The adoption of artificial intelligence (AI) by the Chinese hedge fund High-Flyer is igniting a fierce competition among mainland asset managers, threatening to disrupt China’s $10 trillion fund management industry.
High-Flyer, a prominent quant fund, has not only integrated AI into its multi-billion-dollar portfolio but also founded DeepSeek, China’s most significant AI start-up. This cost-effective, large language model has taken Silicon Valley by surprise, challenging the West’s dominance in the AI sector.
As a result, emerging Chinese hedge funds, including Baiont Quant, Wizard Quant, and Mingshi Investment Management, are accelerating AI research. Additionally, numerous mutual fund companies are rushing to incorporate DeepSeek into their investment processes.
“We are at the eye of the storm of an AI revolution,” said Feng Ji, CEO of Baiont Quant, which utilizes machine learning to trade without human intervention. “Two years ago, many fund managers mocked or disbelieved in AI-powered quants. Today, these skeptics risk going out of business if they don’t adapt.”
While most funds are using AI to analyze market data and create trading signals tailored to investors’ risk profiles, few are developing DeepSeek-like models. However, the rise of homegrown systematic trading firms similar to U.S. giants like Renaissance Technologies and D.E. Shaw is increasing competition for outperformance, or “alpha.”
Wizard Quant recently launched a recruitment campaign to attract top AI researchers and engineers for a lab dedicated to revolutionizing science and technology. Similarly, Mingshi Investment’s Genesis AI Lab is actively hiring computer scientists to support its AI research and investment strategies.
In a recent roadshow, asset manager UBI Quant informed investors that it had established an AI lab years ago to explore AI applications in investment and other sectors.
The race to develop superior trading strategies using AI demands significant computing power and high-performance chips, and local governments are offering support. The southern city of Shenzhen, for instance, has pledged 4.5 billion yuan ($620.75 million) to subsidize hedge funds’ use of computing power for AI development.
AI Takes Root in China’s Mutual Fund Industry
China’s mutual fund industry is also rapidly embracing AI. Over 20 retail fund companies, including China Merchants Fund, E Fund, and Dacheng Fund, have completed local deployments of DeepSeek.
According to Hu Yi, vice general manager of intelligent equity investment at Zheshang Fund Management, DeepSeek’s open-source, low-cost large language model has significantly lowered the barrier for AI adoption in the mutual fund sector. Zheshang Fund has integrated DeepSeek into its AI platform and is developing AI agents to enhance research and investment efficiency.
“AI agents will handle much of the work that junior analysts currently do, such as monitoring market signals and drafting daily reports, allowing human analysts to focus on more creative tasks,” Hu explained.
Larry Cao, Principal Analyst at FinAI Research, noted that before DeepSeek, AI had been reserved for top-tier firms due to the cost, talent, and technology required. “DeepSeek has leveled the playing field for Chinese fund managers, who are smaller than their U.S. counterparts,” he said.
Baiont’s Feng Ji added that AI’s rapid progress gives newer players the opportunity to challenge larger, established firms. “A seasoned fund manager may have 20 years of experience, but with AI, one can gain that experience in two months using 1,000 GPUs,” said Feng, whose five-year-old firm manages 6 billion yuan, surpassing many older rivals.
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