June 14, 2024
Five ways AI is turbocharging asset management

Artificial intelligence (AI) is projected to inject a staggering $16trn into the global economy by 2030, surpassing the combined economic outputs of giants such as China and India.

Its monumental potential cannot be denied and begs the question how it will reshape the investments advisers select for their clients?

AI-enhanced funds are not just a futuristic concept but a present-day reality transforming asset management. As an adviser, understanding these changes is essential to harnessing AI’s full potential.

1. Data management and processing

AI’s first significant impact is data management. Traditional quantitative methods falter under the sheer volume of modern data streams, from real-time news to complex alternative data sets. AI thrives in this environment, enabling portfolio managers to extract actionable insights instantly.

This capability allows investment decisions to be based on a comprehensive, up-to-date dataset, significantly improving the responsiveness to market changes.

2. Forecasting and identifying investment opportunities

AI’s predictive power is pivotal in forecasting and identifying new investment opportunities. By replicating and enhancing traditional statistical methods, such as regression analysis, AI algorithms can create robust predictive models.

These models are instrumental in suggesting potential investment hotspots and are continually refined with incoming data to enhance accuracy. Although specific to historical data, their adaptability means they evolve with the market, keeping strategies both relevant and proactive.

3. Risk management

Risk management is another critical area where AI is making a definitive impact. AI algorithms excel in analysing vast datasets to identify patterns that may predict market downturns or highlight risk exposures – insights far beyond human perceptibility.

This capability allows for proactive risk-mitigation strategies, helping portfolio managers safeguard portfolios against volatility. AI’s predictive analytics not only enhance risk assessment but also tailor investment strategies, ensuring a personalised approach to risk tolerance and investment goals.

4. Managing unpredictable situations

Despite its many strengths, AI does face challenges, particularly with novel and unprecedented events such as pandemics or geopolitical shifts.

The key lies in developing AI systems that are both stable and adaptable, capable of learning from new developments without losing their foundational analytical base. This balance is crucial for maintaining reliability in unpredictable market conditions.

5. Operational gains and client customisation

The operational benefits of AI extend beyond market analysis and risk management. AI technologies can automate and streamline numerous aspects of asset management, from client onboarding to regulatory compliance, thus reducing manual errors and operational costs.

This not only enhances efficiency but also allows more focus on strategic decision-making. Additionally, AI’s rapid processing capabilities enable timely, accurate investment recommendations.

Daniele Grassi is chief executive and co-founder of Axyon AI

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