If there’s one thing that investment professionals can agree on, it is that artificial intelligence (AI) is going to have a profound impact on the industry over the next 12 months.
Fears about AI’s potential impact on the labor market has provoked a backlash within society in recent months. But just what effect might AI have on investment management, its practices and ultimately its clients?
What is clear is that asset management has not only made peace with the new technology but is openly embracing it. Almost all firms (95%) have increased their AI budgets over the last year and 85% expect to increase them by 50% or more in the next 12 months.
Clearwater’s latest global research discovered that almost two-thirds (62%) of asset management firms believe that AI will transform the creation of standardized written outputs and the condensing of complex data into concise summaries. More than half (57%) say the effect on how firms look at historical and current data to forecast outcomes and evaluate stress test scenarios will be no less impactful.
A similar number (58%) believe AI will revolutionize decision support systems, particularly where potential actions or parameter changes are proposed, such as portfolio rebalancing based on specific objectives and constraints.
To say that AI is largely about cutting costs is overly simplistic and fails to take account of some of the innovations we are seeing today.
Natural language agents are reshaping day-to-day operations. Almost three-quarters (73%) of investment professionals consider them effective at querying investment platforms, risk management and reconciliation, while 62% find them effective for doing deep dive analysis. In nearly half of responses (47%) these tools are found to be “very effective” for more complex subjects such as regulatory compliance.
AI is being used to improve workflow automation and limiting repetitive workflows such as daily report generation, say 63% of managers. Almost as many firms (62%) say they have successfully used AI to trigger operations based on specific data thresholds or schedules indicating a move toward more sophisticated autonomous system behaviors.
It appears that managers who use AI can interrogate data quicker and more extensively, freeing up time from completing repetitive tasks, while behaving more nimbly when changes need to be made. In other words, they can do better research, deliver better compliance, take swifter actions and therefore have more time to focus on the generation of alpha.
Almost three-quarters of managers (70%) have found that AI has sharpened their focus on data management, while two-thirds (66%) now feel the AI tools they use are effective at managing the unique challenges of alternative data which have been historically difficult to scale. This represents a massive leap forward in capability, but there remains a great deal of work to do.
Successful deployment of AI relies on reliable data. Only just over half (56%) of firms rate their data as accurate or reliable, while fewer than four out of five (79%) said that it was complete. While AI may be focusing minds on data, there remains a degree of mistrust within the industry.
Clearwater’s research shows that 18% of managers expect to see minor or little impact from AI. This is not because AI won’t prove useful within their business, but because they face obstacles within the company culture or internal infrastructure that will prevent them from exploiting the technology.
The firms who have committed the most investment to AI are those working hardest to improve the quality of their data. Those who successfully deploy AI within their front, middle and back offices will release resources and develop capabilities that others will find difficult to compete with.
Developing and delivering better data, analysis and insights will help bring better investment returns, serving not only the business, but improving service to clients. Over the next year, AI will have a profound impact on the investment industry. Those who fail to commit to that journey will very soon find themselves left behind.
Clearwater helps investment professionals make that journey with confidence. Clearwater AI embeds AI directly into the investment workflow, so teams can surface insights, ask questions of their data, and work more efficiently across complex portfolios.
To see what separates firms turning AI investment into measurable value from those still struggling to realize its potential, download the full report, GenAI and the Data Divide.