By 2025, institutional investors expect the investment landscape to change, with more artificial intelligence (AI) at the helm of this reshaping, despite the technology’s current lack of adoption.
According to Fidelity Institutional Asset Management, investors “appear to be at a crossroads” in determining the outcome of man versus machine, with a near split decision on whether their jobs will be replaced or improved.
The firm’s 2018 Global Institutional Survey said 53% of institutional investors think their roles will become mechanizedSet featured image, while 60% said the continued importance of the human connection will be valued as the technology becomes more integrated and expands upon their investing capabilities.
The survey polled 905 investors from 25 countries representing pension funds, financial institutions, and insurance companies with $29 trillion in combined assets under management. These investors are also predicting the continued rise of AI to bring quicker, more accurate, and more efficient markets and decision-making with it.
About 62% of respondents expect new trading algorithms and quantitative models will add market efficiency, with 80% believing blockchain and similar technology will “fundamentally change the industry.”
As the advancements persist, so will reliance. A majority (69%) predict they will need AI for asset allocation optimization, while 67% feel they will need it for keeping track of manager evaluations, and the performance and risk of their portfolios. Roughly 40% said they could use it to create custom portfolios without any asset manager assistance.
Jeff Mitchell, chief investment officer, Fidelity Institutional Asset Management, said “expanding data sets, faster computing power, and smarter technologies” are bringing the industry shift closer. “As investing becomes more transparent and real time, the implications for asset allocation and portfolio construction will be profound,” he said.
While institutional investors are predicting AI to either take the reigns or do some of the heavy lifting in 2025, only 10% of respondents had fully integrated it into their investment processes. A Fidelity spokesperson told CIO that the 10% is part of the two-thirds “who have either fully integrated, are currently testing or are exploring its capabilities – which is encouraging.”
“It’s still early days when it comes to these emerging technologies,” Judy Marlinski, president of Fidelity Institutional Asset Management told CIO. “Some institutional investors may not yet have set aside the time to explore the potential of these technologies – but, not being prepared is not an excuse, so that’s why we want these findings to be a call to action for those that haven’t yet made it a priority.”