Technology will fundamentally change investment industry but not all institutional investors are ready

From

Paras Anand

Institutional investors worldwide expect that new technology tools will significantly reshape the investment industry landscape by 2025, but a large proportion are yet to test the water with emerging technologies, according to the latest Fidelity® Global Institutional Investor Survey.

The survey, which is the largest of its kind with responses from 905 institutions in 25 countries with US$29 trillion in investable assets, found institutional investors across the globe expect markets and decision-making will be faster, accurate and more efficient as new technologies take hold. Globally, 62 percent believe that trading algorithms and sophisticated quantitative models will make markets more efficient and 80 percent believe that blockchain and similar technologies will fundamentally change the industry.

Institutions recognise the impact that artificial intelligence (AI) is likely to have with many expecting to rely on it in the near future for capabilities including: optimising asset allocation (69 percent), monitoring and evaluating manager  / portfolio performance and risk (67 percent), and even creating custom portfolios without the assistance of asset managers (39 percent). However, only one in ten (10 percent) have fully integrated artificial intelligence into their investment process today, with the majority (66 percent) not using AI capabilities currently, although some expressed interest in exploring it at some point in the future.

Paras Anand, Head of Asset Management, Asia Pacific, Fidelity International commented: “Technology continues to evolve at a rapid pace, bringing vast and accessible new sources of data to investment teams. The implications for asset allocation and portfolio construction will be profound and in many cases, positively transformative for the industry.

“However, following new data sources or algorithms should not be done blindly. AI is not capable to make investment decisions alone and more data can simply give way to the risk of mistaking mere noise for valuable insight. But if carefully considered investors can embrace AI to enhance their process.”

Fidelity’s research suggests that institutional investors appear to be at a crossroads in their understanding of how man versus machine will play out. The research shows that more than half (53 percent) of institutional investors believe that technology will replace traditional investment roles, yet, many expressed the continued importance of the human connection with the majority of those surveyed (60 percent) believing that AI will augment jobs rather than replace them.

Importantly, institutions will continue to value the expertise and insights their investment partners bring to the table, including non-investment perspectives on market psychology, emerging opportunities, strategy and problem-solving.

Paras Anand added “Getting ready to harness new technologies in the right way is a challenge for the entire industry. Asset managers who provide expertise and work in partnership to help clients understand and sensibly leverage these new technologies, in combination with their existing talent, will be the ones adding most value.”

The surveys were executed in association with Strategic Insight, Inc. in North America and FT Remark, a Division of the Financial Times, in all other regions. CEOs, COOs, CFOs, and CIOs responded to an online questionnaire or telephone inquiry.

You must be logged in to post or view comments.