J.P. Morgan Chase & Co. has launched IndexGPT, a new family of indexes using GPT-4, the latest version of OpenAI's deep-learning software, a spokesperson for the company confirmed.
IndexGPT — basically a way to create thematic indexes — was launched after pilot testing and about one year after J.P. Morgan trademarked the word “IndexGPT.”
The capability will be deployed in J.P. Morgan's quantitatively selected themes (or Quest) framework — a model that builds thematic indexes for the firm’s institutional clients, the spokesperson noted.
IndexGPT is part of J.P. Morgan’s strategic indexes business, which develops systematic, rules-based trading strategies wrapped into indexes for its institutional clients. These indexes are available across the major asset classes and geographies and cover common investment themes.
The indexes, the spokesperson explained, are built using industry-standard index construction methods, including market cap weighting rules and liquidity filters.
Quest, which has been provided to clients since 2021, uses natural language processing, or NLP, to determine whether a company is related to a specific theme. Some examples of thematic indexes include artificial intelligence, cloud computing, genomics and esports, multiplayer video games played competitively with spectators.
Quest does this by scanning news articles written about the company, and looking for specific keywords in these articles — keywords represent the vocabulary of the theme.
A high percentage of articles that contain linked keywords is used as an indicator that the company is thematically linked.
Under supervision of the investable index team, Open AI's software, GPT-4, will be used to generate a static list of keywords one-time only at the creation of each thematic index. The spokesperson added that internal tests have already demonstrated that the GPT algorithm more successfully identifies keywords than prior NLP models by generating a larger distribution of keywords and a superior description of the theme.
This launch, the spokesperson noted, is part of a broader effort to apply AI techniques to support the firm’s global strategic index business over the coming months and years.
The spokesperson added that the popularity of thematic indexes will depend on market conditions, emergence of new technologies and structural trends. Regarding expectations for IndexGPT, the spokesperson noted that J.P. Morgan foresees an increase in client engagement and broader adoption of quantitative techniques applied to thematic indexes. On the wider use of GPT, the spokesperson said the firm is very excited to incorporate this cutting-edge technology into its product development and that it hopes to expand its footprint here.
J.P. Morgan's asset and wealth management business ended 2023 with $3.4 trillion in assets under management.
