Clearwater Analytics: AI will generate higher alpha
Asset managers believe that artificial intelligence (AI) models will be crucial to delivering a new era of alpha returns, new research from Clearwater Analytics, drawn from its GenAI and Data Divide study, shows.
The study, which covered a broad spectrum of fund managers including insurance asset managers, hedge funds, private markets specialists, and general asset manager, reveals that over the next three years, nearly all asset managers (95%) surveyed believe that AI will be important for their organization to meet its investment management goals, with 3% considering it to be absolutely critical to their success.
The Alpha Opportunity:
AI-generated analysis and data is already being used for investment decisions between a quarter and half of the time at almost half (43%) of fund managers, according to the survey. Some managers have deeper integrations and at 10% it is being used between 50% and 74% of the time.
Almost all (96%) of asset managers expect to see AI change how work is done in each of their business functions over the next year. One fifth (20%) said that the change will be transformative, and a further 32% said that there will be major change.
Further areas of change:
All managers anticipate a degree of change within data, onboarding and normalization, and most of it is evenly split between minor (33%), moderate (31%) and major change (31%). The rest (6%) believe the change will be transformative.
More than nine out 10 managers (94%) said there will be change in accounting and financial close; a quarter (25%) said the change will be transformative, while a further 29% said it would be major and 26% moderate.
Perhaps the biggest change will occur within regulatory accounting and reporting, where only 4% said there would be little or no impact. More than a quarter (28%) said change would be major, but the largest group (31%) said it would be transformative for this part of the business.
This will influence communications and client reporting such as the production of performance reports, fact sheets and client summaries, where 84% said they expect moderate (25%), major (38%) or transformative (21%) change.
These changes continue through to investment research and due diligence, where more than a third expect moderate change (35%) while almost half anticipate major (28%) or transformative (20%) change.
Almost all (96%) of asset managers expect AI to change how portfolio construction and rebalancing is done. One third (33%) said the change would be major, while 14% said it would be transformative.
Nearly all (97%) of asset managers said risk monitoring and stress testing will be changed by AI, and almost three quarters (73%) said it would be moderate (36%) or major (37%).