‘How, not if’ for AI usage by fund managers
Artificial intelligence (AI) is transforming asset management, according to Mercer, as its survey finds the majority are planning to use or already using it in their work.
Usage of AI by asset managers may have ramped up in the past year, it said, but the firm noted this is the culmination of a three-year development behind the scenes. They report it is being used across areas such as big data analysis, idea generation, investment decision-making, and portfolio construction.
Speaking on a webinar, Nick White, global strategic research director at Mercer, said: “Today’s players are in an arms race to deliver next-generation, game-changing technological solutions, not just in mega tech companies but in every company around the world.
“Every CEO has replaced the word ‘technology’ with the word ‘AI’ because they all want to be doing more there and be seen to be doing more.
“AI has applications across multiple industries and is transforming the asset management industry.”
Referencing an AI Integration in Investment Management 2024 survey, which surveyed 150 asset managers, it found they are generally positive on the technology regardless of whether they are using or planning to use it.
Nine out of 10 managers are either already using AI in their investment processes or planning to use it. Usage is largely focused on augmenting existing capabilities through the expansion of data sets and analysis and idea generation, but a minority are deploying it in portfolio management, including for asset allocation, portfolio construction, and rebalancing.
“Machine learning is primarily used to make portfolio implementation more efficient, rather than as a way to forecast returns,” a respondent told the report.
More than half of AI-integrated investment teams reported that AI analysis informs rather than determines final investment decisions, and a fifth said it proposes investment decisions which they can override.
Financial services and wealth management are identified as a prominent area of opportunity for value creation, but the jury is out, Mercer said, on whether it will have a commercial impact on assets under management and revenue.
It is “imperative” that asset managers and their investment teams include expertise in AI as the space is quickly evolving and requires expert knowledge.
“The gap between leaders and laggards will naturally be greatest in the industries where AI is causing the most disruption,” White said.
Key considerations for asset managers when it comes to AI usage are adopting a strategic approach to organisational implementation, putting data privacy at the core of implementation, being cost-aware, and thinking about the long-term people strategy.
AUTHOR
Laura Dew
Recommended for you
Women are expected to inherit US$124 trillion through the intergenerational wealth transfer, but Capital Group has found they are twice as likely to rely on social media for advice over a financial adviser.
Challenger Investment Management has raised $350 million during the offer period for its new ASX-listed investment structure.
A week after Lonsec downgraded multiple funds from Metrics Credit Partners, rival research house Zenith Investment Partners has opted to retain its ratings for the same funds.
Strong adviser engagement has helped Praemium reach $1 billion in inflows on its Spectrum offering, with a deal with Western Australian wealth firm Euroz Hartleys expected to add as much as $2 billion.
