Institutional Asset Manager Newsletter 12.05.23

The robots are coming

A March report from Goldman Sachs predicts artificial intelligence (AI) will replace 300 million jobs worldwide, the vast majority of which will be in the administration and legal sectors, but it looks as if fund managers should not breathe easy.
Goldman Sachs notes that advances in AI are expected to have "far-reaching implications" for the financial services industries, some of which will be positive, but a recent experiment from finder.com suggests some asset management roles may be at risk.
Analysts at the site compared investment strategies from AI technology ChatGPT against top UK managers, and found the computer outperformed many of their human counterparts including those at Fidelity, HSBC and Vanguard.
The findings suggest that AI may be better than people at least when it comes to index management, but what about active strategies?
This week we spoke to Adrian de Valois Franklin, CEO of Castle Ridge Asset Management, which has built an "evolutionary computing-based artificial intelligence system for active dynamic portfolio management", otherwise known as WALLACE.
According to de Valois Franklin, WALLACE can analyse thousands of stocks for a fraction of the time and cost of employing humans to do the same job.
"It does take a lot of resource to run WALLACE, but it’s a lot less than if we had hundreds or thousands of portfolio managers running the same money. We do have a big competitive advantage," he says.
De Valois Franklin says more fund managers are looking at harnessing the power of AI with many hoping to include in it their strategies. The difference to Castle Ridge, however, is that most will keep automation as a complement to their human portfolio managers, rather than as a wholesale replacement. Maybe fund managers can rest easy then, at least for now.
Elsewhere Liontrust Asset Management announced a conditional acquisition of GAM Holding AG (GAM), a global investment management firm with GAM’s Investment Management division having assets under management (AuM) of CHF23.3 billion (GBP20.9 billion) as at 31 March 2023.
If successful, the new enterprise will create a global asset manager with GBP53 billion in AuM on a pro forma basis.
John Ions, Chief Executive of Liontrust, expresses "great confidence" that the merger will result in an "enlarged business to create long-term value".
However, the deal faces a formal challenge from an investor group comprising NewGAMe and Bruellan, which together own 8.4 per cent of GAM, who say the terms of the deal run counter to Swiss takeover laws.
Shareholders have until the 11th August to approve the deal.
Gill Wadsworth, Editor

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