The WEALTHTECH Book

Financial Forecasting and Portfolio Optimization in the 21st Century

By Dr Jeremy Sosabowski

CEO, AlgoDynamix

“Diversification is the only free lunch in town”, so the saying goes… but is this still really the case? And if not, how are newer technologies changing, or more likely transforming and disrupting, some of these traditional asset management industry assumptions?

This chapter will look at some of the ongoing trends and changes in the financial services industry and how asset managers can (or should) be transforming themselves to stay relevant and “ahead of the curve”. This will include an overview of different technologies, including the buzzwords “du jour” such as machine learning and cloud computing. The predominant focus will be on asset managers active in the equity markets, as this asset class has over and over again demonstrated long-term capital growth potential; this is obviously subject to appropriate portfolio management, including de-risking and using the right technology choices at the right time.

A Very Brief History of Time and Technology

Advances in technology have been at the forefront of financial services, especially if these solutions can demonstrate a clear competitive and economic advantage. Already, back in the days of the Crimean War, competitive advantage was gained from improvements in communication speed by using carrier pigeons instead of horses. The modern-day equivalent has been to build direct microwave radio point-to-point links between ...