The global market for artificial intelligence in asset management was worth about $2.6 billion in 2022 and is expected to expand at a compound annual growth rate of 24.5% from 2023 to 2030, according to analysts at Grand View Research. From automated analysis of recent earnings-report data to analyzing relationships between stocks and market indicators — and a whole lot more — AI as an asset management tool is emerging as a powerful way for investment firms to meet market performance goals and land more clients.
Make no mistake, the asset management sector shift to AI is already happening, with 62% of professionals at wealth management firms in Forrester’s Future Fit Survey 2022 predicting they’d increase spending on emerging technologies, such as AI tools, in the following 12 months.
Additionally, in a survey of the 50 top hedge funds, nine out of 10 hedge fund traders planned to use AI in 2023 to meet portfolio return goals, according to London-based market analytics and AI research specialist Market Makers.
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“For investment management firms, AI can provide machine-learning algorithms to collect and analyze large amounts of data, predict prospects and price trends, and (give notice to) investors at any time,” says Gracy Chen, managing director at crypto derivatives exchange Bitget. This includes technical and quantitative analysis, Chen says.
“To more professional investors, AI can offer continuous monitoring of abnormal transactions in the (stock) market, and evaluation and screening of oversold assets,” Chen adds. “High-frequency trading robots based on AI algorithms use highly optimized and real-time response trading systems to quickly execute buy and sell transactions and generate profits for investors.”
What top-tier investment management firms are already deploying AI for asset management, and how are they using it? Here’s a closer look at seven firms already exploring new frontiers in AI:
— JPMorgan Chase & Co. (ticker: JPM).
— Morgan Stanley (MS).
— Vanguard Group.
— Deutsche Bank AG (DB).
— ING Groep NV (ING).
— Fidelity.
— Wealthfront.
JPMorgan Chase & Co. (JPM)
This investment management giant is leveraging AI to build a software platform, similar to OpenAI’s widely used large language model ChatGPT, to choose investments for client portfolios that are custom-designed to meet their unique needs. The company filed to trademark the term “IndexGPT” for the system in May 2023, with the AI-fueled stock-selection service trained on a mammoth 100 trillion words’ worth of investment themes like stock prices, earnings reports, and analyst reports and ratings.
“Generative AI will change the world for better and for worse. For once, the hype is (mostly) justified.” — David Folkerts-Landau, global head of Deutsche Bank Research
Company CEO Jamie Dimon alluded to JPMorgan Chase’s increasing reliance on AI in a 2022 letter to shareholders. “AI has already added significant value to our company,” Dimon stated. “For example, in the last few years, AI has helped us to significantly decrease risk in our retail business (by reducing fraud and illicit activity) and improve trading optimization and portfolio construction (by providing optimal execution strategies, automating forecasting and analytics, and improving client intelligence).”
Morgan Stanley (MS)
Already in acceleration mode with AI, Wall Street staple Morgan Stanley is linking up with OpenAI to enable the firm’s financial advisors to immediately access the firm’s research library to delve into information on client portfolio strategies and harvest relevant content in seconds.
“We aim to leverage OpenAI’s breakthrough technology into a competitive advantage in how our financial advisors can harness Morgan Stanley’s knowledge and insights in ways that were once never thought feasible,” says Andy Saperstein, co-president and head of Morgan Stanley Wealth Management. “(AI) technology is a game changer in synthesizing our expansive intellectual capital, bringing the value and richness of it to a whole new level, and in the process freeing up valuable time for financial advisors to do what they do best: serve their clients.”
Vanguard Group
Vanguard CEO Mortimer J. “Tim” Buckley has already embraced AI as not only a dynamic asset management powerhouse, but also as an all-around investment company management vehicle. Speaking at the Investment Company Institute Leadership Summit in Washington, D.C., in May, Buckley said the technology is already changing the way executives look at the investment firm.
“What we’re suddenly discovering with generative AI (is that) there are a lot of cognitive things that we do that are actually fairly routine,” Buckley told conference attendees. “So you’re going to go through this revolution of suddenly all those routine cognitive tasks, those will be automated.”
Vanguard is already using AI tech to act as a robo advisor that uses the company’s exchange-traded funds, or ETFs, to generate personalized retirement portfolios for clients.
Deutsche Bank AG (DB)
In December 2022, Deutsche Bank announced a “multiyear innovation partnership” with Nvidia Corp. (NVDA) to embed artificial intelligence into Deutsche’s financial services and generate multiple AI-based applications, including intelligent avatars, speech AI and financial fraud defense. The AI partnership is expected to speed up analytical risk-and-return analysis and allow portfolio managers and traders to run investment selection scenarios at an accelerated pace.
Deutsche Bank will also beef up its internal AI center and explore other AI-infused accelerated computing tools to transform its client management experience. “Generative AI will change the world for better and for worse,” writes David Folkerts-Landau, global head of Deutsche Bank Research. “For once, the hype is (mostly) justified.”
[READ: Megatrends: AI and Robotics]
ING Groep NV (ING)
The Dutch investment banking firm has been using artificial intelligence for several years now. In 2017, the company rolled out Katana, its bond-trading market analysis system, which can run through hundreds of thousands of real-time trading scenarios. The company reported Katana improved trade analysis times by 90% and curbed trade desk operating costs by 25%.
More recently, ING reaffirmed its commitment to AI with its June 2023 hiring of Bahadir Yilmaz as chief analytics officer. At the announcement of his new position, Bahadir noted AI should revolutionize financial services in general, and at ING in particular. “The developments in the last six months have demonstrated the transformative power of analytics and AI,” he said. “At ING, we are committed to providing seamless, secure and digital services to our customers, and analytics is a key enabler of this.”
ING is also ranked seventh in the world for “AI maturity” among financial services firms on the Evident AI Index from Evident Insights. At the top of that list is JPMorgan Chase.
Fidelity
Boston-based financial services behemoth Fidelity is investing heavily in technology, with plans to hire 734 new technology specialists in the first six months of 2023, 352 of those new hires headed to Fidelity’s Research Triangle Park in Durham, N.C.
AI applications should be a sizable cornerstone for the investment firm; in fact, some are already up and running. In January 2022, Fidelity announced Saifr, its AI and machine-learning system that automates its compliance management operations, giving the company a big advantage in a highly regulated industry. The Fidelity AMP automated digital advice platform, which first launched in 2017, is leaning on AI and machine learning to analyze data and make investment recommendations for Fidelity clients.
“It’s still early for AI, but I increasingly believe it has the potential to start the next major wave of computer technology — following cloud computing and mobile — leading to a potential multiyear investment theme that could reshape the technology sector in the coming years,” said Ali Khan, a technology sector leader at Fidelity, in a March 2023 report called “The Next Generation of Artificial Intelligence.”
Wealthfront
The online-only automated investment manager’s engagement with artificial intelligence dates back to 2016, when Wealthfront unveiled its AI-based application programming interface. The API merged personal financial interfaces for finding hidden fees and evaluating household budgets with portfolio management advice modeled by machine learning. The dashboard also featured a futuristic component (for 2016, at least) that forecasted the users’ net worth over decades if they followed a programmed investment strategy over a long period.
Seven years later, Wealthfront has expanded its AI-based asset management services, adding more features to its personalized investment portfolio services platform, such as automatic portfolio rebalancing, tax-loss harvesting and the rollout of Path, the investment firm’s AI-based holistic financial planning advisory analytics tool.
Additionally, the firm’s Self-Driving Money strategy completely automates a user’s savings and investment plan, relieving its customers from having to make direct money management decisions like moving cash around or monitoring financial accounts.
AI’s Effect on Asset Management
What does AI mean for investment firms in terms of asset management, and what do AI, chatbots and enhanced technology tools bring to the table? Plenty, financial technology experts say.
“AI has become a powerful tool for portfolio managers who need to uncover the unknown ‘unknowns’ relevant to the companies in their portfolios and their investment themes,” says Chandini Jain, founder and CEO of Auquan, an AI-powered investment research firm.
The world has changed considerably over the past decade, with increasingly complex global supply chains, new kinds of regulatory and reputational risks, and a combination of information overload and critical hard-to-get data, Jain says.
“Used effectively, AI can make sense of this ever-changing investing landscape and help portfolio managers not only stay ahead of idiosyncratic company risks, but also produce the ideas that generate alpha,” Jain says.
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7 Top Investment Firms Using AI for Asset Management originally appeared on usnews.com
