Actives face more competition from artificial intelligence

Robot handGerman investors anticipate a greater role for artificial intelligence (AI) in asset management and say these advanced computers are already competing with traditional active managers.

Well over half (62%) of 90 German institutional investors predict greater usage of AI for short-term decision-making, and 17% for medium term investment decisions.

More than half say AI is already competing with traditional active management.

AI in asset management is essentially based on machine learning, where a computer makes quantitative assessments of market conditions.

Markus Neubauer, managing director of Universal Investment, which carried out the survey, says artificial intelligence is displacing active management.

“Over two thirds of the institutional investors believe that artificial intelligence is capable of accurately assessing emotional aspects such as greed or fear. The industry’s future thus certainly appears to be closely linked with the strategic use of AI.”

A related finding of Universal’s survey, which looks at broader investment trends among investors, is that three-quarters of the 90 institutional investors want to increase their equity quotas over the next two years – but only 17% will use active, non-rules based strategies. This indicates a continuing trend towards passive and computer-driven quantitative strategies.

Further findings were:

  •  78% want to increase their alternative quotas to between 3-9% as rates remain low
  •  Their preference is for real estate and, to a lesser extent, infrastructure
  •  77% said they would access real estate using an investment vehicle rather than investing directly in the asset class.

The investors were polled at the October conference of Universal Investment, though the figures are published today. Universal Investment manages assets of about €260 billion.

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