The Edge Report looks at how systematic and quantitative investing firms are navigating a year of macro instability, rising data costs, and an AI transition that's moving faster in ambition than in practice. Built on survey responses from senior leaders across hedge funds, asset managers, and sell-side desks - nearly two-thirds of them running $5bn or more in AUM - the report paints a picture of an industry in disciplined recalibration rather than crisis.

Here are the ten findings that stood out most.

1. Data cost is the number one structural challenge. Nearly a third of firms (32%) name data costs and availability as the single biggest structural challenge to their investment approach - ahead of AI disruption, regulation, and macro instability combined.
2. The macro regime is where alpha hurts most. 42% cite macro regime instability breaking existing models as the top source of pressure on alpha, narrowly ahead of data costs outpacing the returns they generate.
3. AI is everywhere in support, almost nowhere in alpha. AI is now live in risk monitoring (59%), data pipelines (54%), and coding (48%) but in direct alpha signal generation at just 10% of firms.
4. Adoption is real, but shallow. 97% of firms use AI in some form. Yet only 3% describe it as central to the investment process. The rest are still piloting or embedding it into specific workflows.
5. Capability is running ahead of integration. 65% of firms say new data capabilities exist that they couldn't access a year ago but haven't yet changed their process to use them. The gap between what's possible and what's operational is widening.
6. Normalization is the choke point. Half of all firms (51%) locate their most significant data-quality failure at normalization - reconciling inconsistent formats across vendors - not at ingestion or storage.
7. Cyber tops the risk agenda. 46% put cyber risk and operational resilience among their top three risk priorities, ahead of crowding and macro regime change.
8. AI governance is lagging its own adoption. 54% say their AI governance is either less mature than their traditional model governance, or has no formal framework at all.
9. Confidence in the edge is thin. Only 27% of firms are fairly or very confident in their ability to maintain a competitive alpha edge over the next two years. The most common answer: "moderately confident."
10. The bond hedge is being rebuilt. 52% have either replaced or supplemented bonds with alternative diversifiers, or reduced their bond allocation outright, in response to the breakdown in the traditional bond-equity correlation.

The takeaway

Taken together, these findings point to an industry that has comprehensively adopted the tools of the current era - alternative data, machine learning, cloud - and is now discovering that adoption was the easy part. The harder, more consequential work is integration: turning capability into process, models into governed models, and data into decisions that actually move returns.

The firms that lead systematic investing over the next two years won't be the ones with the boldest story about AI. They'll be the ones that turn the story into infrastructure.

The Edge Report was produced by Future Alpha in partnership with S&P Global Market Intelligence, Mistral AI, and LMAX Group.