Crafting Portfolios Tailored to Investor Preferences with Generative AI

16 Pages Posted: 30 Apr 2024

See all articles by Jean-Jacques Ohana

Jean-Jacques Ohana

AI For Alpha

Eric Benhamou

Université Paris Dauphine; AI For Alpha; EB AI Advisory; Université Paris-Dauphine, PSL Research University

Beatrice Guez

AI For Alpha

Baptiste Lefort

University of Paris-Saclay - CentraleSupélec; AI For Alpha

David Saltiel

Université Paris Dauphine; A.I. Square Connect; AI For Alpha

Thomas Jacquot

AI For Alpha

Date Written: April 27, 2024

Abstract

Investors often face challenges aligning portfolios with specific preferences or regulatory constraints, such as avoiding commodities. Can machine learning offer a solution? Using Graphical Models, we frame this as an inference problem to replicate a desired fund within set constraints. Our approach achieves a high correlation with the target portfolio, allowing cost-effective replication. An example to decoding global macro hedge funds is provided. It shows very stable correlation emphasizing that the method is able to replicate the strategy even under some strong investment constraints.

Keywords: Graphical Models, portfolio replication, investor preferences

JEL Classification: G11, G17, G23

Suggested Citation

Ohana, Jean-Jacques and Benhamou, Eric and Guez, Beatrice and Lefort, Baptiste and Saltiel, David and Jacquot, Thomas, Crafting Portfolios Tailored to Investor Preferences with Generative AI (April 27, 2024). Available at SSRN: https://ssrn.com/abstract=4809740 or http://dx.doi.org/10.2139/ssrn.4809740

Jean-Jacques Ohana

AI For Alpha ( email )

35 boulevard d'Inkermann
Neuilly sur Seine, 92200
France

Eric Benhamou (Contact Author)

Université Paris Dauphine ( email )

Place du Maréchal de Tassigny
Paris, Cedex 16 75775
France

AI For Alpha ( email )

35 boulevard d'Inkermann
Neuilly sur Seine, 92200
France

EB AI Advisory ( email )

35 Boulevard d'Inkermann
Neuilly sur Seine, 92200
France

Université Paris-Dauphine, PSL Research University ( email )

Place du Maréchal de Lattre de Tassigny
Paris, 75016
France

Beatrice Guez

AI For Alpha ( email )

35 boulevard d'Inkermann
Neuilly sur Seine, 92200
France

Baptiste Lefort

University of Paris-Saclay - CentraleSupélec ( email )

Moulon Plateau 3 Joliot Curie Street
Gif-sur-Yvette, 91190
France

AI For Alpha ( email )

35 boulevard d'Inkermann
Neuilly sur Seine, 92200
France

David Saltiel

Université Paris Dauphine ( email )

Place du Maréchal de Tassigny
Paris, Cedex 16 75775
France

A.I. Square Connect ( email )

35 Boulevard d'Inkermann
Neuilly sur Seine, 92200
France

AI For Alpha ( email )

35 boulevard d'Inkermann
Neuilly sur Seine, 92200
France

Thomas Jacquot

AI For Alpha ( email )

35 boulevard d'Inkermann
Neuilly sur Seine, 92200
France

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