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3 Ways that AI will Impact Mutual Funds and Asset Management

Disruptive technologies have been in the news a lot lately. And with good reason: they are transforming the way entire industries operate. Mutual funds and asset management firms are not immune.

According to a PWC report, after analyzing more than 150 emerging technologies, it narrowed its list down to eight technologies that it refers to as the Essential Eight:

1) Robots
2) Internet of Things
3) Augmented Reality
4) Virtual Reality
5) Block Chain
6) Artificial Intelligence
7) 3D Printing
8) Drones

Those that don’t take notice of emerging softwares and technologies are at serious risk of disruption down the road (if not already). Obviously these different technologies will impact different industries in different ways.
Out of all of these disruptive technologies, artificial intelligence (AI) is slated to have the most serious consequences for the asset management world.

Here are our thoughts on how some of AI and automation may affect asset management and mutual funds in the years to come.

1) AI for Enterprise Content Management (ECM) 

It’s in the news a lot these days and for good reason. Some fear it, like Elon Musk, while others embrace it, like Mark Zuckerberg. Part of the confusion is that AI has become a catch-all buzzword for everything from Terminator’s Skynet to chatbots on Slack.

No matter your personal views on the subject, AI is already making waves in the asset management space. Most hedge funds and mutual funds are obligated to produce copious amounts of content. AI software that is able to comb through a content library in a relatively short amount of time will transform the way asset management organizations create reports. Couple that with the burgeoning area of voice interaction e.g. Alexa and Google Voice, and it’s not far fetched that in the near future you’ll be able to create and assemble content during your morning or evening commute.

Content automation and document automation are fertile areas for AI to make its presence felt. Nights and weekends spent drudging through an enterprise content management system to make sure that there are no duplicates or inaccurate disclosure reports are coming to an end.

In other words, AI for ECM means that mutual fund employees will have more time to focus on other pressing needs instead of diving through their content libraries, sifting through thousands of documents. The AI software will be able to handle the document management process for them.

2) AI for Investing

Computers excel at processing large quantities of data in a blink of an eye. Just take a look at IBM Deep Blue’s victory over chess grandmaster Garry Kasparov in 1997, and, more recently, IBM Watson’s Jeopardy triumph. Thanks to advances in machine learning, they are constantly getting smarter.

Now, investors and asset management funds will have a new ally as they look for innovative investment strategies: AI.
As Andew Dassori, the Chief Investment Officer of Wavelength Capital Management writes,

“Being able to analyze more information with greater intelligence than what is humanly possible is a structural change in an industry well equipped for innovation. Investors naturally focus on where they can have an edge, and combining their strengths with those of AI will increase the value they create with each investment.” 

AI-centered investment strategies will give mutual funds and asset management firms a powerful tool in the future.
What will AI mean for Wall Street analysts? Some fear that new automation software, like that of Kensho Technologies, could mean that robots will displace many professions on Wall Street.

Though some jobs will be automated, others will be created as well. But what they will look like remains to be seen.

3) Robo Advisors

Another disruptive innovation, robo advisors have become increasingly popular since they allow customers to set up diverse investment portfolios at a low cost. By using complex algorithms, robo advisers provide automated investment advice at a fraction of what it would cost to receive the same financial advice from a human.

Though they have been around since 2008, we have seen their popularity increase over the past couple years. Wealthy individuals have begun to invest with robo advisors as well.

While they are called robo advisors, the technology is in fact another example of how AI software is transforming the financial sector. They are essentially pieces of software, equipped with complex algorithms that automatically manage a customer’s investments (with minimal human intervention).

Robo advisors are part of a broader trend in which we are seeing the proliferation of automated advisory services in the wealth management industry. One report estimates that by 2020, robo advisors will manage approximately 10% of total assets under management worldwide, which will amount to $8 trillion.

Automated investing services will continue to make their presence felt in the years to come.

 

The Future of AI in the Investment World

 

Keep an on eye how AI will continue to transform the way asset management firms and mutual funds operate. Financial technologies (fintech) are evolving rapidly and asset management businesses that fail to find a way to work them into their business model may be devastated by a competitor who does.

It is critical that firms continue to devote resources to understanding how AI or some other innovative piece of software may impact their sector of the financial industry.

Venture capitalist Marc Andressen coined the phrase “software is eating the world.” Well, in the years ahead we will watch AI software eat the world.

It is already starting to feast on the investment world.

Want to learn more about what AI will mean for enterprise content management and content automation? Let’s have a conversation.