Investment management


Artificial Intelligence

The next frontier in investment management

Artificial intelligence is opening up new frontiers for investment management firms to drive efficiency and enhance innovation but bold decision-making is needed when allocating capital to initiatives with the potential for value creation

The operating environment for investment management firms worldwide continues to undergo sustained transformation as welldocumented industry challenges intensify. Limited organic growth, volatile capital market returns, and fee and margin compression have created a more challenging context. In this shifting paradigm, technology continues to play a critical role in enabling rapid business transformation, as well as driving opportunities for efficiencies, innovation, and value creation. With traditional sources of differentiation becoming increasingly commoditised, AI is providing new opportunities which extend far beyond cost reduction and efficient operations. Many investment management firms have taken note and are actively testing the waters, applying cognitive technologies and AI to various business functions across the industry value chain.

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Ten AI use-cases in investment management

Portfolio management and client enablement:

Automated insight:
Reading earnings transcripts to assess management sentiment

Relationship mapping:
Identifying nonintuitive relationships between securities and market indicators

Alternative datasets:
Analysing alternative data such as weather forecasts and container ship movements, monitoring search engines for words on specific topics to structure hedging strategies

Growth opportunities: 
Using corporate website traffic to gauge future growth along with clients’ behavioural patterns

Client outreach: 
Smart client outreach and demand generation via analytics, using alternative data sources such as social media data 

Front, middle and back office efficency:

Operations intelligence: 
Using machine learning to automate functions

Powering risk performance: 
AI-based algorithms and machine learning to monitor for suspicious transactions, and trigger response protocols

Reporting and servicing: 
Generating reporting for clients, portfolio and risk commentary, and marketing material using natural language processing

On-demand reporting:
Chatbots and machine learning used to respond to employee or investor queries, generating management reporting on-demand

Employee Insights:
Monitor employee conduct risk and employee morale

“AI is providing new opportunities which extend far beyond cost reduction and efficient operations.”

Four Pillars for Transformation:

The evolving status quo in the investment management industry thrusts into the spotlight the growing importance for firms to make bold decisions to allocate capital to capabilities and initiatives which offer potential for transformation and value creation. We have identified four pillars for transformation.

  • Pillar #1: Generating alpha
  • Pillar #2: Enhancing operational efficiency
  • Pillar #3: Improving product and content distribution
  • Pillar #4: Managing risk

To learn more about the four pillars, download the full report here

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