Artificial Intelligence for Asset Management and Investment

Chapter 14Investment: Managing the Returns Loop

WE HAVE DISCUSSED SEVERAL SUPPORT FUNCTIONS in asset management that can benefit from AI—but if Nabisco does not make good cookies or GM does not make good cars, it will not matter how well the support functions perform. Similarly, if your investment operation does not perform, you do not have a business. At the heart of your firm is your investment operation. Build it with care and diligence. This chapter is about helping you envision the modern-era investment function. Of course, how you structure the function will depend on your firm's core strategies and business model. However, I want to provide a general overview so you do not miss out on strategic areas and also because you can evolve into areas that are not part of your existing business model.

While our previous coverage was on the client loop, this chapter is about the returns loop.

WHO IS RESPONSIBLE FOR INVESTMENT MANAGEMENT?

The investment management function is headed by an investment professional who reports to the CEO. Unlike other business and functional areas, the work chain capabilities (data, model, evaluation, deployment, and performance) allocated to this function are greater in terms of both quality and quantity. The peculiar nature of finance machine learning requires a degree of separation with the business and other functional areas.

HOW TO APPROACH BUILDING THE NEW-ERA INVESTMENT FUNCTION?

In a world defined by uncertainty, we strive to predict the ...