Fund managers deploy machines to decipher British election riddle

Question: How do you predict the outcome of a snap election when so many polls have been so wrong, half of voters haven’t made up their minds and the crucial factor may not be who wins, but how much they win by?

Answer: Unclear.

So financial investors, who could make or lose fortunes on the result of Britain’s Dec. 12 vote, are taking matters into their own hands and arming themselves with every predictive tool at their disposal – from artificial intelligence analysis to private polling and sports betting techniques.

Faced with such an unpredictable and financially pivotal election, fund managers say they can’t put their faith in pollsters who failed to accurately call the last two British elections and dramatically dropped the ball on Brexit and Trump.

“In the past opinion polls accounted for 85% of your input, now maybe it’s 30%,” said Stephen Jen, macro hedge fund manager at London-based Eurizon SLJ. “The world has become so complicated that polls, the standard metrics of the past, don’t capture the picture anymore.”

Reuters interviewed more than two dozen big investors, including Aviva, Legal and General, NN Investment Partners, State Street Global Advisors and M&G Investments.

Most said they had turned to AI-based tools that variously analyzed news reports, social media, web traffic, opinion polls and betting odds to decipher how the vote might play out.

Brexit has scrambled traditional political allegiances, with Prime Minister Boris Johnson’s ruling Conservatives pledging a swift split from the EU, the main opposition Labour promising another referendum and others vowing to stay in the bloc.

It will not be enough for Johnson simply to win more seats than any other party – he needs a parliamentary majority to ensure Brexit happens. Any other outcome is likely to lead to a second referendum on EU membership.

Given the stakes, recent studies show almost half the electorate are now considered undecided “floating voters”.

“Frankly, this election is by far the most difficult to call in living memory,” said Edward Shing, global head of equity derivatives strategy at BNP Paribas.

Source: Reuters