AI Isn’t Replacing Credit Hedge Fund Traders Yet, Barclays Says
(Bloomberg) — Hedge funds and asset managers are increasingly using artificial intelligence when investing in global credit markets, but the technology is not replacing human traders, at least for now, according to a survey by Barclays Plc.
The survey found that although AI has moved beyond the experimental, tentative stage across all types of investors, it is used primarily for research, securities screening and analysis, and is a complement to rather than a replacement for human judgment.
“In general, AI is expected to reshape roles and workflows rather than significantly reduce headcount in the near term,” strategists Zornitsa Todorova and Andrea Diaz Lafuente wrote in a note on Thursday. “The dominant view is generally higher productivity with stable headcount.”
Only 7% of 410 buy-side investors surveyed by Barclays in North America, EMEA and Asia last month expect a meaningful reduction in headcount. Artificial intelligence is primarily used for research; accounting for 44% of responses among hedge funds, 52% for both asset owners and long-term asset managers, followed by modeling and risk analysis. The survey shows that so far AI has acted primarily as a support for investors, with security screening accounting for 25% to 26% of responses for hedge funds and long-term managers and 20% for asset owners.
The penetration of artificial intelligence in trade and enforcement remains minimal; At least 77% of hedge funds, 84% of long-term managers and 88% of asset owners say AI plays a limited role. Its use in portfolio construction remains relatively small across all groups, strategists added.
Electronic and high-speed trading innovations that currently dominate equity markets are slowly reshaping debt markets in what has been called “credit equalization.”
According to Barclays, security and data privacy are the biggest constraints across all groups, reflecting the sensitivity of trading data, proprietary models and customer information. Other challenges hindering AI adoption include regulation, compliance, cultural resistance, and consistency with more structured organizations.
The survey also found that hedge funds are outpacing their peers in adopting AI, with 72% of hedge funds using it on a daily basis, far more than the 49% of long-only managers and the 38% of asset managers.
“This difference reflects different operating models,” the strategists said. “Hedge funds run faster, higher-turnover strategies where speed and information processing are critical for alpha. Unlike asset owners, they have longer horizons and more structured processes, resulting in more gradual adoption. Only long-term managers are caught in the middle.”
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