Article Written By Samy Nakach – Investment Analyst at I Know First

Highlights

As 2025 draws to a close, I Know First’s AI-powered systematic strategies have delivered exceptional returns that dramatically outpace both the S&P 500 and the world’s top multi-strategy hedge funds.

• The MAGIC Strategy achieved an extraordinary 67.1% return year-to-date (through December 1st), nearly 4x the S&P 500’s 17.7% and more than 5x the average return of elite hedge funds.
• The Combined Long/Short Strategy delivered 27.2% YTD, outperforming the S&P 500 by 9.5 percentage points and surpassing every major hedge fund tracked.
• These results demonstrate how AI-driven systematic approaches can consistently identify opportunities and manage risk more effectively than traditional discretionary methods.

The Power of AI-Driven Portfolio Management

While traditional hedge funds rely on teams of analysts and discretionary decision-making, I Know First’s proprietary self-learning algorithm processes over 13,500 assets daily across 50+ global markets. This systematic approach eliminates emotional bias, identifies repeating market patterns, and adapts continuously to changing market conditions.

The algorithm evaluates each asset across six distinct time horizons (3-day, 7-day, 14-day, 1-month, 3-month, and 1-year), creating a multi-dimensional view of market opportunities that traditional analysis simply cannot match. By requiring signal confirmation across multiple horizons, our strategies capture high-probability moves while filtering out market noise.

How the AI Uncovered These Exceptional Returns

Both the MAGIC Strategy and Combined Long/Short Strategy leverage our AI’s core capabilities:

• Multi-horizon signal confirmation: Each position is validated across at least 4 of 6 time horizons, ensuring robust directional alignment
• Predictability scoring: The algorithm ranks assets not just by expected return, but by forecast reliability
• Systematic rebalancing: Portfolios adapt monthly to shifting market dynamics without emotional interference
• Risk-optimized allocation: Position sizing balances opportunity with portfolio-level risk management

Performance Comparison: AI vs. The World’s Best Hedge Funds

The year-to-date results through December 1st, 2025 tell a compelling story: AI-Powered Strategies outperformed top Hedge Funds with up to 67% YTD Return on our new MAG 7 Strategy

These results are not anomalies. They represent the culmination of a year where our AI-powered approach consistently identified opportunities that traditional fundamental and quantitative methods missed. While even the best-managed hedge funds struggled to beat the market, our systematic strategies delivered substantial alpha through disciplined, data-driven execution.

The MAGIC Strategy: Exceptional Risk-Adjusted Returns

The MAGIC Strategy stands as one of our most sophisticated systematic approaches, combining equity selection with sector rotation and risk management overlays. Here’s what makes it unique:

Strategy Structure

• 60% MAG 7 Individual Equities: Top-ranked stocks with multi-horizon signal confirmation
• 20% GICS Level 2 Industries ETFs: Broad sector exposure to capture thematic trends
• 10% SPY/Market ETFs: Core market exposure and capital deployment buffer
• 20% 5 Individual Stocks

The Combined Long/Short Strategy: Institutional-Grade Performance

Designed specifically for institutional investors seeking market-neutral exposure with downside protection, the Combined Long/Short Strategy delivered 27.2% returns while maintaining a balanced risk profile.

Strategy Mechanics

• Long/short equity positions: Simultaneous long and short exposure based on directional signals
• Multi-level ETF integration: GICS Level 1 and Level 2 sector exposures for diversification
• Monthly rebalancing: Adapts to regime changes without overtrading

Why It Outperformed Elite Hedge Funds

Traditional multi-strategy hedge funds face inherent limitations: human decision-making latency, position crowding, and fee drag from multiple strategy layers. Our AI-powered approach eliminates these frictions:

1. Speed of adaptation: Daily forecasts mean the algorithm responds to market shifts faster than quarterly rebalancing cycles
2. No position crowding: Systematic signals avoid the herd mentality that plagues discretionary funds
3. Consistent process: No style drift, no manager changes, no strategic pivots—just data-driven execution

What This Means for Institutional Investors

For banks, family offices, investment houses, and hedge funds, the 2025 performance of our AI strategies represents more than impressive numbers. It demonstrates a fundamental shift in how systematic investing can compete with—and beat—the world’s most sophisticated discretionary funds.

Key Institutional Benefits

1. Scalable alpha generation: Performance doesn’t degrade with increased AUM like discretionary strategies
2. Transparent process: Every signal, every position, every decision is rules-based and auditable
3. Risk management: Systematic position sizing and rebalancing eliminate behavioral biases
4. Customization: Strategies can be tailored to specific risk budgets, sector preferences, and investment mandates
5. 24/7 monitoring: The algorithm never sleeps, continuously scanning for opportunities and risks

The technology gap between traditional hedge funds and AI-powered systematic strategies is widening. Funds that integrate algorithmic forecasting into their investment process gain a measurable edge in both return generation and risk management.

Looking Ahead: The Future of AI-Powered Investing

As we approach 2026, the evidence is clear: artificial intelligence is not just competing with traditional investment approaches—it’s surpassing them. The 67.1% return from the MAGIC Strategy and 27.2% from the Combined Long/Short Strategy aren’t outliers; they’re the natural result of applying machine learning and pattern recognition at scale.

For institutional investors, the question is no longer whether to adopt AI-driven strategies, but how quickly they can integrate these approaches into their investment frameworks. The opportunity cost of delay is measured in percentage points of underperformance.

Why AI Will Continue to Outperform

• Data processing scale: Humans can’t analyze 13,500 assets across 6 time horizons daily
• Emotional discipline: Algorithms don’t panic in volatility or chase performance in rallies
• Continuous learning: Every market move improves the model’s pattern recognition
• Speed of execution: Signals are identified and acted on faster than discretionary processes allow

Custom AI Strategies for Institutional Clients

I Know First offers fully customizable AI-powered systematic strategies for institutional investors. Our technology can be tailored to:

• Specific market exposures (US, European, Asian markets)
• Risk budgets and volatility targets
• Sector preferences or restrictions
• Long-only, long/short, or market-neutral orientations
• ESG and impact investing criteria

Each strategy leverages the same core AI technology that powered the 67.1% and 27.2% returns in 2025, adapted to your specific investment objectives and constraints.

Citations and Sources

• Saacks, B. (2025, December 5). How Citadel, Balyasny, and other big hedge funds performed in November. Business Insider. https://www.businessinsider.com/hedge-fund-performance-november-citadel-balyasny-exoduspoint-2025-12
• ‌Mackenzie, N., & Sen, A. (2025, December 4). How hedge funds performed in a volatile November. Reuters. https://www.reuters.com/business/finance/how-hedge-funds-performed-volatile-november-2025-12-03/
• ‌All data is calculated until Dec 1st, 2025