Artificial intelligence remains “broadly aspirational” when integrating the technology into investment practices, and is still unable to adequately perform tasks such as portfolio construction, Georg Elsäesser, a senior portfolio manager at Invesco, told Pensions & Investments.
Elsäesser made the comments to coincide with the launch of the Invesco Global Systematic Investing Study, based on the views of 131 institutional and wholesale investors that collectively manage $22.3 trillion.
Relative to other investment styles, systematic and factor strategies were viewed as those most likely to benefit from AI, the report found.
“AI remains broadly aspirational, and there’s a very small scope of usage right now, and there’s a huge difference between where it is used and where investors think it can be used in the future,” said Elsäesser.
“If you look at something like textual data analysis, natural language processing, it's in there. It's also already being commoditized because everybody does it. In areas such as using AI to construct portfolios, that is still aspirational, but it's gravitating towards that.”
The study also found that tech stock outperformance, such as that of the “Magnificent Seven” megacap tech equities, has led systematic investors to recalibrate their strategies.
Factors aligned with the success of large tech companies such as momentum, growth and quality were found to have “performed exceptionally well” over the past year, while value underperformed. Now, concentration risk has driven a turnaround with more than half (52%) of investors increasing their allocations to value in the past 12 months as they seek a potential hedge.
“As someone who runs factor based, sector neutral investment strategies, we would seek momentum, but across the board.
“With this approach, you are no longer dependent on getting the Magnificent Seven right. This is eye opening, because concentration is a risk, especially if you are a stock picker and getting six or seven stocks right or wrong can kill you or make you a star. Whereas the factor investor would say, I just don't want to be dependent on these (specific stocks),” said Elsäesser.
Headquartered in Atlanta, Invesco had assets under management of $1.8 trillion as of Sep. 30.