HOW BIG DATA, ARTIFICIAL INTELLIGENCE AND BLOCKCHAIN WILL SHAPE THE FUTURE OF ASSET MANAGEMENT

Asset management firms are tasked with handling their clients’ wealth and investments by mitigating risks and maximizing profitability. They achieve this by picking up on market trends to guide their investment and divestment decisions. In addition to constantly monitoring the market movement, asset managers also need to ensure regulatory compliance, which is becoming difficult due to the existing uncertainty regarding market regulations. To overcome these challenges and to stay agiler in a highly dynamic market, leading asset management firms are increasingly incorporating analytical tools and technologies into their processes. This has led other institutions in the industry to track technology trends in asset management and keep up with the industry leaders in the adoption of these tools.

Here is how technology can transform the asset management realm:

 

1. Big Data

Effective delivery of asset management services such as mutual fund management, equity management, or fixed asset management requires access to analysis of large volumes of data. Thus, it only makes sense for asset management agencies to incorporate big data analytics into their decision-making processes. Big data tools can analyze huge chunks of market data and evaluate risks and opportunities associated with different assets. The analysis of assets based on vast amounts of historical data helps asset managers to identify assets that are headed towards peak profitability as well as the ones diving towards insolvency. Advance knowledge of market trajectory minimizes risk and maximizes the ability to spot opportunities for profits. Asset management software programs driven by big data analytics to evaluate financial risks are already gaining popularity among asset and wealth management companies.

 

2. Artificial Intelligence

Following the industry-wide adoption of big data to gain market insights and monitor asset performance, the next wave of disruption in the asset management industry is being brought about by artificial intelligence (AI). AI, fueled by big data, can not only provide descriptive market insights but can also recommend prescriptive actions for future to maximize return on investment. AI can evaluate investment options by measuring the environmental, social, and governance (ESG) score of companies, which acts as an indicator of their long-term sustainability. Another application that forebodes the use of AI in asset management is robo-advisor, and AI application that provides clients with investment advice without requiring human intervention. Although existing AI applications cannot be fully trusted with high complexity investment problems such as those involved in mergers and acquisitions (MA), they can help individuals preserve and increase their wealth.

 

3. Blockchain

Any discussion regarding technology in finance, will be incomplete without the mention of blockchain. Blockchain’s ability to store data in a universally synchronized and decentralized manner can enable asset management companies, especially in ensuring regulatory compliance. Blockchain is becoming synonymous with privacy and involves maintaining private, secure records, such as client information. Blockchain can store client information in an anonymized, immutable manner to meet regulatory standards. It can also be used to speed up transactions involved while trading or liquidating assets such as stocks and commodities. Blockchain eliminates the need for intermediaries and cuts down on transaction time, without compromising security.

Although such technology trends in asset management might suggest the marginalization of human involvement in the process, the truth is that humans will remain an essential part of the process. Technologies like AI, powered by big data and secured by blockchain, will no doubt be more effective at making asset management decisions and executing them. However, functions like devising a long-term strategy, making complex decisions, and governing the technology mandate human contribution.