Currently 81% of fund management businesses are using some form of artificial intelligence to improve efficiency, according to a report by U.K. pension consultants XPS Group.
The "Impact of AI on Asset Management" report also showed that 44% of were using AI in investment decision-making. However, only 9% were using generative AI, which creates new content by extrapolation of old data, in investment decisions.
The report also defined three different types of artificial intelligence; narrow, the format currently used and applied through large language models such as ChatGPT; general, which would develop the ability to solve complex problems; and super, which would be self-awareness, “represented as ‘Skynet’ in the 'Terminator' film,” according to the report.
Potential benefits of AI for investment managers identified in the report included reduced costs through greater efficiency that leads to lower fees, better informed decision-making that would lead to improved returns and improved risk management leading to clearer understanding of risks and monitoring for exceptions.
Identified risks included unpredictable behavior from AI when relying on systems trained on datasets unknown to the user and market instability arising from common market-wide responses to unforeseen events.
“We are just at the infancy of generative AI within asset management, but already half of respondents are using generative AI in at least one area of their business,” said Simeon Willis, chief investment officer at XPS, in the report.
In compiling the report, XPS received responses from 76 investment managers with assets under management totaling £34 trillion ($43 trillion) globally, covering asset classes from listed equities and fixed income, to private assets and hedge funds.
As of Dec. 1, XPS Group had a total of £113 billion ($143.8 billion) in assets under advice.
