I bet when academics were drawing up lists of likely professions ready for the AI chop in the coming age of robotics, they didn’t spend much time looking at fund managers. With their cossetted, over paid lifestyles, fund managers seem secure. Of course passive funds can easily be ‘automated’ but active management is all about the ACTIVE HUMAN i.e the fund manager.
Then again i suppose the rise of the algo driven quants in hedge fund land should have put us on alert. But here again, Ialways thought it was the human (well, mathematician at least!) developing and then driving the algo. But no AI seems to have come to fund management and fund managers might start quaking in their boots. As the Pr note from Sanlam says below, when it comes to managing risk maybe a machine is better at the job.
Note from Sanlam
Sanlam Global Investment Solutions (SGIS) has announced that the Sanlam Managed Risk (SMR) UCITS Fund is now managed solely by Artificial Intelligence (AI) — making it the first Balanced Fund in the world fully driven by AI.
The financial markets have been through significant change in recent years. With unprecedented central bank participation, markets now move faster than ever before. Investment strategies need to keep pace in order to provide investors with the optimal client experience.
The SMR UCITS Fund, previously managed by a systematic investment process, is now managed by an advanced Artificial Intelligence (AI) & Machine Learning (ML) investment engine. David Itzkovits — Head of Investments for SGIS, comments, “The goal at SGIS was to find a solution that can adapt as quickly as the markets change. Our AI capability does this by applying the latest in ML techniques which have multiple years of live operational experience and a real, impressive track record. The AI investment engine derives its decision making in a different way to other investments and should be viewed within a client’s overall investment strategy as a diversifier of existing human manager risk. Because in today’s world, it’s not man vs. machine, it’s man with machine vs. man without.”
Cobus Kruger, CEO of SGIS, comments, “the purpose of AI is to help humans more efficiently process and interpret the vast amounts of data. Machine Learning autonomously learns and adapts to new data without being programmed and at speeds that are far beyond human capacity. These two factors together should provide good value and help deliver better, more consistent outcomes for investors.”
AI & ML can be applied in investment management broadly in two ways:
i. Enhancement of a manager’s current investment process — By producing timelier asset allocation and stock allocation buy/sell signals on a portfolio of instruments chosen directly by the investment manager.
Or the way in which the SMR Fund is utilizing it,
ii. Total automation of the investment process — Meaning the AI selects the optimal portfolio allocation based on a pre-defined investment strategy with objectives, constraints and investable instruments.
Gideon Nell — Head of Global Distribution for SGIS, added, “At SGIS, we have been on a quest to supply investors with a truly differentiated investment solution designed to eliminate human emotions, actively adapt to changing markets and help to materially improve the consistency of achieving investment goals with significantly reduced downside risk. We believe the AI capability ticks all these boxes and in the form of the Sanlam Managed Risk UCITS Fund, provides a transparent easily accessible vehicle. The absence of human input to make investment decisions continues to support our belief in behavioural finance”.
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