AI in Asset Management – a lightbulb moment

Time to bolster the human brain “black box” with the science of AI

As asset managers, insurers, financial advisors and wealth managers take stock and consider their future pathways, many are drawing the same conclusion: That clients want products that reflect their values, and which are aligned with their investment and broader life objectives. That much is clear. What is less clear is how to deliver this volume of customised solutions when organisations are under enormous pressure regarding fees.

Clients are moving trillions of dollars into sustainable investments. At the same time, asset managers recognise that the key to remaining competitive is customisation. Four out of five asset managers believe mass customisation will be a critical growth driver over the next five years, while 85% of investors demand products which are aligned with their own sustainability values.

The one-size-fits-all approach to investment management is in rapid decline. Until now, the closest solutions to meeting the demands for values-aligned products have been built around cheap passive strategies. This old analogue model of asset management and wealth management is broken.

Autonomous asset management: it’s not science fiction

Delivering the volume of product required to meet individual client demands for customisation is often prohibitively expensive. Imagine the time and resource required for an investment team to create a single, marketable strategy from conception through distribution. Now imagine an asset manager’s ten largest clients each demanding a custom strategy tailored to their values.

This is where technology – and in particular, AI – can come in and help asset managers and wealth managers solve these issues by providing customised investment solutions at scale. AI can build in 30 minutes what an investment professional would take six months to produce.

We already use artificial intelligence to create and run investment portfolios today. It’s not science fiction. It’s everyday fact. Artificial Intelligence is permeating products and client solutions in asset and wealth management at a rapid pace.

The speed at which these drivers – sustainability, customisation, and technology – are transforming not only financial services but businesses and industries globally, cannot be overstated.

No, the robots aren’t coming

So, what does the future of asset management look like? Well, first of all it’s here already. AI is not the preserve of Hollywood blockbuster. It’s real and being used every day to power investment strategies.

For instance, from our office overlooking Camden Lock in London we create thousands of hyper customised, active investment strategies built around client investment and sustainability objectives through our solution AutoCIO. Visitors are welcome. We use AI, but we are still humans (well, most of us are).

So, what does this mean for asset management? Are all portfolio managers to be phased out? Will AI take over? We don’t think so. Rather, the asset managers who recognise the power AI can bring to shaping their future business – to harness technology to deliver robust, customised, explainable, and cost-effective investment strategies – will be the ones who thrive.

Many have already had their lightbulb moment and are aware of the power of AI. For others, it may take longer. Perhaps the time has come to end our over-reliance on the ultimate black box – the human brain and the magic of human decision making – and rather embrace the science, transparency, and rigour of AI. We use and benefit from AI in our everyday lives, why would we not want to use AI in our investment solutions?

Arabesque AI are bronze sponsors of IMpower Incorporating FundForum 2022. Find out more about the 2022 event and agenda here >>

Launched in 2019, Arabesque AI is a London-based research and technology company offering sustainable investment solutions through cutting-edge artificial intelligence research. Born out of a desire to apply AI to any investment scenario, we have developed a unique AI Engine to analyse equity market behaviour, enabling our clients to build a diverse range of customisable equity investment strategies tailored to individual needs through our AutoCIO platform.