Asset managers are increasingly turning to artificial intelligence to make investment decisions, track portfolio managers’ habits, and identify lucrative opportunities. JPMorgan intends to expand the use of a generative AI tool known as “Moneyball” to identify questionable decisions by portfolio managers, with the goal of correcting biases and enhancing the decision-making process.
Kristian West, head of investment platform for JPMorgan Asset Management, elucidated that the tool is designed to demonstrate to portfolio managers how they and the market have behaved in similar circumstances. In essence, Moneyball assists them in learning from past behaviours and improving their decision-making process.
At Voya Investment Management, a virtual analyst has been implemented to monitor stocks for potential risks, complementing the human research staff. This virtual analyst has demonstrated a good ratio of accurate and inaccurate decisions, with portfolio managers having access to a dashboard where the human analyst’s review of securities can be viewed alongside AI feedback, further enhancing the decision-making process.
Legalist, a hedge fund focused on litigation finance, utilizes a proprietary AI search tool called “Truffle Sniffer” to identify attractive investment targets among civil suits. This tool scrutinizes court records for signs of favourable outcomes, such as friendly judges and litigation classes, as well as pre-trial rulings that indicate strong cases.
The use of AI in investment decisions has even expanded to the development of an AI-powered exchange traded fund in the LQAI ETF, launched by South Korean conglomerate LG and SoftBank-backed Qraft Technologies. This ETF relies on a proprietary AI stockpicking tool, with recent AI-generated reports explicating its decisions to favour certain companies and sectors while divesting from others.
Despite these advancements, AI’s potential to drive long-term returns for asset managers has its sceptics. Veteran portfolio manager David Giroux argues that most AI-focused intellectual capital in asset management is focused on finding a short-term edge, rather than estimating earnings potential years into the future.
The use of AI in asset management is a significant development, with the integration of advanced technology into investment decisions indicative of the industry’s evolution. As more asset managers embrace AI to complement human analysts in identifying investment targets, it is clear that the landscape of asset management is shifting towards smarter and more informed decision-making processes.