BlackRock says research into growth of data, signal points, application of AI and the improved returns over time derived from achieving consistent alpha have led to the conclusion that use of systematic strategies is set to continue growing through the rest of the decade.
Outlined in a paper titled Alpha reimagined, the manager states: "Data availability has been evolving exponentially in recent years, in line with the rise in computing power. Systematic strategies have been growing through increased use of data-driven techniques that seek to generate consistent alpha – adoption of these strategies, further powered by the rapid growth of active ETFs, is a key market trend. Just looking at the active equity category, for example, we project systematic strategies’ market share to grow from 11% to 15% between 2024 and 2030."
The increasing use of large language models (LLM) in AI has given a boost to the efficacy of using the significant volumes of data now available, the paper notes.
"Data creation and storage has exploded in recent years, increasing by a factor of 100 over the past 15 years. There are limits to how much of this humans by themselves can track. The numbers help tell the story: at BlackRock, our Systematic team analyzes 15,000 global equities each day, as well as 3,000 global credit issuers – and these are just examples of traditional financial metrics. There are tens of thousands of more inputs beyond these. We believe analyzing, processing and understanding this data is a critical basis for investing at scale."
The manager notes that its own system incorporating AI application, BlackRock Systematic, has delivered consistent performance with over 90% of its investment strategies beating peer median on a 5-year basis. The system achieved 61.3% accuracy in forecasting stock returns 40 days after earnings announcements, outperforming leading large language models such as GPT-4 and its successors, which ranged from 49.7% to 54.9%, according to BlackRock's figures. This has resulted in growth in net new business in its systematic area - with net sales of some $17bn in 2024, and some $23bn Q1 2025 - and growth in AUM, now at some $317bn.
"One specific application is market neutral. Systematic market neutral strategies, including both hedge funds and liquid alternatives, can enhance portfolio diversification by offering return streams that are less correlated with traditional markets," it added.
Raffaele Savi, Global Head of BlackRock Systematic, said: "BlackRock Systematic is constantly innovating with the goal of delivering consistent alpha across asset classes through a scalable and repeatable process, leveraging the latest advancements in data and technology combined with decades of research experience and creativity.”
Click here to read the full Paper_Alpha reimagined
