Artificial Intelligence for Asset Management and Investment

Chapter 1AI in Investment Management

FIRMS WITH A HIGHER-LEVEL AWARENESS are not faring any better than those that lack imagination or alertness. When it comes to AI, firms seem to be split between denial and dysfunction. Those in denial view AI as a passing fad, an overly hyped phenomenon, a lustful yearning of large firms, a deviant path to shatter human relationships, and a phase whose efficacy parallels that of other digital technologies. Those in dysfunction are the fearless warriors who want to embrace anything that sounds like AI. They want AI at any cost—even if it means implementing AI without understanding what AI is, knowing how to plan and deploy AI, where and why to implement it, or how to maximize value from AI.

The ones in denial need no plan. The ones in dysfunction have none. Here are some examples of the above mindsets:

If you talk to investment management firms about AI as I do, you may hear something along these lines from the deniers: “I know our model works. We have been doing this for over 40 years. My clients know me. We meet regularly with clients. We have our methods, and we have perfected it as an art or a science—whatever you want to call it. I know how to find value. I know what my clients expect of me. I don't need no fancy technology.” This narrative implies that the firm is confident that its existing business model is sustainable without any modification and augmentation from AI. For them, having AI is no better or worse than not having it. ...