SHANGHAI/SINGAPORE — The use of artificial intelligence (AI) by Chinese hedge fund High-Flyer has ignited a surge in AI adoption among mainland asset managers, a trend that could disrupt China’s $10 trillion fund management sector. High-Flyer, which integrated AI into its multi-billion-dollar portfolio, is also behind DeepSeek, the country’s leading AI start-up. DeepSeek’s cost-effective large language model has made waves, challenging Silicon Valley’s dominance and reshaping the AI landscape.
This innovation has inspired other hedge fund managers in China to invest heavily in AI research and development. Emerging firms like Baiont Quant, Wizard Quant, and Mingshi Investment Management are intensifying their focus on AI technologies, while a growing number of mutual fund companies are incorporating DeepSeek into their investment operations.
Feng Ji, CEO of Baiont Quant, a fund that uses machine learning for market trading with minimal human intervention, described the current moment as being at the “eye of the storm” in an AI-driven transformation. “Just two years ago, many of our peers mocked AI-powered quants. Now, those who fail to embrace AI risk being left behind,” Feng stated.
While these funds are leveraging AI to process market data and generate trading signals tailored to investor risk profiles, the more advanced models, like DeepSeek, remain out of reach for many. However, the landscape is shifting as more Chinese funds adopt AI-based strategies, intensifying competition to generate “alpha”—returns above market averages.
The race for top talent is also heating up. Wizard Quant recently launched a recruitment drive to hire AI researchers and engineers to advance its AI capabilities. Similarly, Mingshi Investment is expanding its Genesis AI Lab to support its growing AI-focused research and investment initiatives.
Other firms are also following suit. UBI Quant, for instance, has had an AI lab in place for several years, actively exploring AI’s potential across various sectors, including investment management.
The competition to create superior trading strategies with AI is pushing funds to invest in significant computational power. Local governments are stepping in to support these efforts. The southern city of Shenzhen has announced plans to allocate 4.5 billion yuan ($620.75 million) to help hedge funds defray the costs of computing resources for AI development.
China’s mutual fund industry is racing to integrate AI as well. A number of prominent retail fund companies, including China Merchants Fund, E Fund, and Dacheng Fund, have already deployed DeepSeek locally. The open-source, affordable nature of DeepSeek has made it an attractive tool for the mutual fund sector, significantly lowering the barriers to entry for AI applications.
Hu Yi, Vice General Manager of Intelligent Equity Investment at Zheshang Fund Management, highlighted DeepSeek’s transformative impact, saying it has “greatly lowered the bar” for AI in the mutual fund industry. Zheshang Fund has integrated DeepSeek into its AI platform, creating AI agents that streamline research and investment processes. These agents now handle tasks traditionally performed by junior analysts, such as monitoring market signals and drafting daily updates, allowing human employees to focus on more creative and strategic responsibilities.
Larry Cao, Principal Analyst at FinAI Research, noted that before DeepSeek, AI was largely the domain of top-tier players due to the high costs, talent, and technology required. However, DeepSeek’s affordability has leveled the playing field, enabling smaller Chinese funds to compete more effectively against larger U.S. firms.
Feng Ji of Baiont emphasized that AI’s rapid advancement has created an unprecedented opportunity for newer funds to challenge established players. “A seasoned fund manager might have decades of experience, but with AI, one can acquire that knowledge in just two months using 1,000 GPUs,” he remarked. Baiont’s five-year-old firm, managing 6 billion yuan, has already surpassed many older, more traditional rivals.
As the AI race intensifies, China’s fund management industry stands on the precipice of significant transformation, with AI poised to reshape how assets are managed, and how returns are generated in the coming years.
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