How AI Can Help Asset Managers Do Their Jobs

The asset management industry needs help as costs mount, profitability shrinks and, amid client pressure, fees drop. What can ride to the rescue? Why, artificial intelligence.

That’s the consensus of asset managers, according to a survey by Boston Consulting Group and two others, the Investment Company Institute and the CFA Institute. BCG published a report on the findings. The research found that two-thirds of the respondents have made generative AI, which aims to mimic human creativity, a strategic priority and 75% are devoting capital and human resources to gen AI deployment over the next few years.

Nevertheless, just 16% of those surveyed have “fully defined” an AI strategy or are working to implement it in their businesses. As the report noted, “most asset managers are still in the early stages of setting their gen AI strategy.”

The need for a business boost is apparent in the asset manager field. While the industry has bounced back from a post-pandemic slump—total assets jumped 12% last year to $120 trillion, after a 9% slide in 2022—profits declined 8.1% because costs climbed and revenue was flat, BCG stated.

Want the latest institutional investment industry news and insights? Sign up for CIO newsletters. 

The report of survey results listed the ways AI can aid asset managers in three categories:

Increasing Productivity. For sales and marketing, AI can draft white papers and send summaries out on social media. In addition, it can “analyze public data about prospective clients and then direct the sales team to the most promising leads.”

For investment management, it can deliver synthesized data that aids in trading. Another plus: “AI can break down silos and minimize redundant analyses, which occur frequently when investment teams [are] managing different funds.” AI also can shorten the time required for preparing investment committee memos by roughly 30%, by BCG’s estimate.

Within risk and compliance, AI can “analyze system logs and real-time data, identify irregular activities, and proactively flag anomalies.” Further, AI can detect signs of market instability and make trades to prevent portfolio damage.

Dealing with Clients. Meeting the needs of allocators and other investment clients is something that a machine seemingly cannot handle. But BCG figured that the stats asset managers can marshal via AI will be of great use to them when assembling and changing portfolios to meet client needs.

For instance, if asset owners want to focus on environmental concerns in their portfolio, then AI can dig deep to ensure that green requirements are actually met. An AI tool can read through companies’ “financial filings, transcripts of earnings calls, analyst reports and news reports.” The tool will then rank these companies and “make adjustments in the portfolio accordingly.”

Navigating Private Markets. For private equity, in particular, AI’s help with due diligence can be a huge boon. Here, publicly accessible data often is less than asset managers like when evaluating a deal. AI tools can find out more: They can analyze public data to gain insight into a private target and to summarize “expert calls and interview findings to articulate the target’s competitive position.” By the same token, these AI tools can guide a “red team” in brainstorming, exercising arguments to challenge the deal.

In biotech, where small, nonpublic companies strive for scientific breakthroughs that investment pros may not fathom, AI can shine a light. AI can speak the language of the scientists and even help them in their work, discovering new molecules and compounds. In that way, “private-market players, such as private equity and venture capital firms, can create significant value” by lending portfolio companies their AI capabilities.

The asset manager survey was conducted by a partnership of BCG, ICI and the CFA Institute, in the first quarter of 2024.

“Generative AI opens up tremendous potential for innovation within the asset management industry,” said Peter Czerepak, a managing director and senior partner at BCG, and coauthor of the report, in a statement. “Achieving results will require strategic thinking and the ability to execute at scale. With traditional sources of growth slowing down, it’s imperative for firms to move forward on this journey.”

Goldman: Artificial Intelligence Will Boost Global GDP by 7%

How Will AI Change Institutional Investing?

Tags: Artificial Intelligence, Boston Consulting Group, CFA Institute, Due Diligence, Investment Company Institute, marketing, Portfolios, Private Equity, public data, sales, Venture Capital

Anouk van der Boor

The Directors Guild of America has appointed Anouk van der Boor as the new CIO of its Producer Pension and Health Plans, effective July 1.

The guild is an 88-year-old entertainment union that represents 18,000 employees and retirees in the film and TV industry, specifically directors and members of directorial teams.

The DGA-PPH plans have total assets of $4.7 billion. Beneficiaries of the pension and healthcare plans include current and retired directors, assistant directors, unit production managers, associate directors, stage managers, and production associates. The guild was founded in 1936, by an association of film directors led by film director King Vidor.

Van der Boor will succeed Edgar Smith, who was the guild’s first CIO when he was appointed to the position in 2022. Smith, who was also named a CIO NextGen in 2019, stepped down from the position in January of this year.

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news. 

“It is an honor and privilege to join the DGA-Producer Pension and Health Plans to support its mission of providing these important benefits to DGA members and their families,” Van der Boor said in a press release. “I am excited to work with the Finance Committee to implement an investment strategy that generates attractive risk-adjusted returns while ensuring access to liquidity.”

Most recently, van der Boor was a managing director of private partnerships at the $2.5 billion Rockefeller University endowment. She was previously a partner and managing director at Cambridge Associates in the firm’s pension practice in Singapore and Boston. Cambridge Associates is also the investment consultant for the DGA.

Prior to her roles at Cambridge Associates, where she joined in 2005, she oversaw the endowment fund and investment office of Citizens Energy Corporation. She was also principal at the Boston-based strategy consulting firm The Parthenon Group. Van der Boor began her career in mergers and acquisitions at Merrill Lynch in London.

Van der Boor holds an MBA from Harvard Business School and a Bachelor of Arts from the European Business School.

“Anouk is a seasoned investor with a track record of delivering strong returns,” said Lisa Read, CEO of the DGA, in a press release. “Her deep experience in private markets and extensive network of manager relationships will open new opportunities for our pension and health plans.”

The Directors Guild of America

The guild offers two plans for participants, a defined benefit plan called the basic plan, and a defined contribution plan called the supplemental plan. Beneficiaries of the DB plan receive contributions to their pension from film and TV residuals.

The two plans have different portfolios. DGA’s s DB plan allocates 23.1% to fixed income, 21.1% to U.S. equities, 16.9% to diversifiers, 11.4% to global equities, 9% to private equity, 8.5% to real assets, 7.1% to credit, and 2.9% to cash. That portfolio returned 9.7% in 2023 and has performed 3.9% through March 31.

The supplemental plan, a DC plan, has a shorter time horizon for investments and has a higher need for liquidity than the basic plan. It allocates 31.4% to fixed income, 18.1% to fixed income, and 18% to diversifiers. Approximately 8.6% of the portfolio is allocated to real assets, 7.4% to credit, 3.9% to private equity and 2.6% to cash. The DC plan portfolio had returned 8.4% in 2023, and 3.7% through March 31.