Logo Header Menu

Survival of the fittest: why asset managers need to embrace AI disruption

Stefan Tittel, CEO of Quantumrock, explores why asset managers need to embrace AI disruption and reap the rewards Why asset managers need to embrace AI disruption image

Asset managers need to embrace AI disruption.

“You never want a serious crisis to go to waste…. it’s an opportunity to do things that you think you could not before.” So said former Obama chief of staff Rahm Emanuel in an interview with the Wall Street Journal during the global financial crisis. For asset management firms, these words are very relevant today.

$80 trillion is currently invested by human strategies in the asset management industry. Despite recognising the critical role that technology will play in the evolution of the industry, unlike technology professionals, too few asset managers have invested in innovation to build-in resilience and stay ahead of emerging trends that are in full force today.

Crises are likely to accelerate new processes — and what better time to make a change than now? To think and do the previously unthinkable and un-doable.

Markets and trend patterns are evolving much more frequently than in the past — old trading models are dying out quickly which creates a significant threat to traditional asset managers. Trading models need to be kept current to tackle these rapidly changing, unpredictable markets but traditional fund firms are often too slow to respond.

Indeed, if there is one industry that would greatly benefit from the genuine adoption of artificial intelligence (AI) and machine learning (ML), it is investment management. Investing, in its simplest form, is about predicting the future. Investment predictions, like all predictions, are made by combining information with a model or method along with the assumption that managers have some advantage which allows them to make predictions that are more likely to be right than wrong.

However, this dusty model can and must change. The human ability to achieve this ever-elusive “alpha” is waning, resulting in the failure of managers to generate promised returns. A key reason for this is the continued reliance on the same information and the same old methods investors use to make decisions.

The use of AI in wealth management must be applied intelligently

It seems obvious, but in case it’s not: the use of AI in wealth management must be applied intelligently; not simply for the sake of it, says M-Files. Read here

Fortunately, advanced AI offers a way out of this rut. Machines have access to an infinite number of trading opportunities, so the models are constantly adapting to market trends, subsequently making them more dynamic. The human mind can step aside and allow AI systems to inform our decision-making processes.

Despite current market volatility, machines are always on the lookout for great opportunities throughout all points of the market cycle. The most significant challenge faced by investors is uncertainty.

However, the focus of humans and human-made models have long been on the strategic side of investing. With AI, the uncertainty is handed to an algorithm where the predictions and timings are completely automated. The influence of emotional and cognitive bias can thus be incrementally removed over time.

Advanced technology has begun to change as AI and machine learning takes an ever-greater portion of the asset management industry. It is invading further and further into the wider strategy domain, which was once the exclusive territory of human analysts.

Overall, asset managers must continue to develop systematic and scientific investment processes in order to generate sustainable risk adjusted returns for their trading activities — and only by embracing a truly new model can you really disrupt the market.

Written by Stefan Tittel, CEO of Quantumrock — an AI-driven investment technology asset manager working to disrupt traditional asset management

This article is tagged with: A.I. Artificial Intelligence

Sign up for Information Age Newsletters

Latest news

divider
Business Continuity
Overcoming the pandemic era with a solid business continuity plan

Overcoming the pandemic era with a solid business continuity plan

27 November 2020 / We’re experiencing a tectonic shift in working practices witnessed by any living generation, with all [...]

divider
Automation
Why RPA is a game changer in the post-Covid era

Why RPA is a game changer in the post-Covid era

26 November 2020 / The Covid-19 pandemic has caused waves of disruption for the vast majority of companies in [...]

divider
People Moves
Colt DCS hires Scott Balloch as new director of energy and sustainability

Colt DCS hires Scott Balloch as new director of energy and sustainability

26 November 2020 / As part of his role as energy and sustainability director, new Colt DCS hire Balloch [...]

divider
Business Skills
Moxtra CTO: ‘The number 1 IT leadership skill I look for in a team hire’

Moxtra CTO: ‘The number 1 IT leadership skill I look for in a team hire’

26 November 2020 / Over the years, I’ve learned that the most important IT leadership skill is to have [...]

divider
Cybersecurity
Proofpoint GM discusses insider threats in a “work-from-anywhere” reality

Proofpoint GM discusses insider threats in a “work-from-anywhere” reality

25 November 2020 / The recently released 2020 Cost of Insider Threats Global Report, collated by Proofpoint and Ponemon, [...]

divider
Automation
Two-thirds of business leaders used automation for Covid-19 response — Deloitte

Two-thirds of business leaders used automation for Covid-19 response — Deloitte

25 November 2020 / According to the research from Deloitte, 73% of organisations worldwide are now using automation technologies, [...]

divider
Research
A quarter of London tech companies may not survive a no-deal Brexit

A quarter of London tech companies may not survive a no-deal Brexit

25 November 2020 / Following economic disruption caused by Covid-19, 75% of London tech leaders have warned that the [...]

divider
Government & Public Sector
Is graph technology the fuel that’s missing for data-based government?

Is graph technology the fuel that’s missing for data-based government?

24 November 2020 / Today, graphs are used in a wide variety of government contexts. Graph databases have been [...]

divider
Cloud & Edge Computing
Q&A: Cloudreach cloud strategist discusses deployment during Covid-19

Q&A: Cloudreach cloud strategist discusses deployment during Covid-19

24 November 2020 / Ahead of AWS Re:Invent, Information Age spoke to Jeremy Ward, cloud strategist at Cloudreach, about [...]

Do NOT follow this link or you will be banned from the site!

Pin It on Pinterest