Experts have repeatedly claimed that Artificial Intelligence (AI) threatens a series of professionals across different industries. And now, the institutional asset management industry is learning to deal with the rise of passive strategies, prompting many to question whether they should be afraid AI will replace them. So, will AI replace asset managers?
According to a MarketWatch analysis, AI couldn’t replace portfolio managers. However, professionals who ignore AI’s role in improving existing strategies do so at their own peril. After all, AI means a series of different things, including technologies that help analysts make sense of large swaths of data. And as any investment professional knows, making sense of data is essential in an increasingly digital world. But how exactly can professionals accomplish this? And how do investors know that AI is being implemented expertly on their behalf?
First and foremost, experts explain, investors must remember that humans are better at identifying patterns and strategizing around them, a quality that machine-learning AI is far from developing. Furthermore, while technology can help professionals analyze data more efficiently, it serves only as a tool for improvement.
As evidenced by the growth in profitability associated with the use of AI over the years, asset management firms and other professionals who use AI see a considerable improvement in their investment portfolios. That’s why many in the field warn colleagues that firms that ignore AI will “fall even further behind the front-runners.”
Investors who are concerned about their asset managers not getting it right must simply look at the service’s performance over time. Understanding that if firms are using AI, they are being able to test their methodology more expertly with the help of technology, and therefore managing to identify and fix potential mistakes.
Still, keep in mind that only the trained human eye is able to come up with effective strategies, and that technology has yet a long way to go before it can compete with humans in that sense.