AI May Surpass Traditional Investment Analysis in the Next Decade
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The influence of artificial intelligence (AI) in the investment sector might be stronger than you think. A report from global asset management firm Invesco reveals that systematic investors are already utilizing AI across a series of core functions.
In the report titled Invesco Global Systematic Investment Study, Invesco states that 50% of systematic investors have integrated AI into their investment processes, indicating a widespread expectation among investors that AI tools will transform portfolio management in the coming years.
The findings also show that 62% of investors anticipate AI will become as important as traditional investment analysis within the next decade, while 13% expect AI to surpass it entirely.
Investors surveyed by Invesco reported using AI to better understand market conditions and identify macroeconomic turning points.
46% of respondents are leveraging AI to recognize market behavior patterns, while 38% are applying AI to portfolio allocation and risk management. Investors are particularly drawn to AI's ability to predict unexpected events and reduce human bias.
The results of the Invesco Global Systematic Investment Study indicate that 29% of investors are currently using AI to develop and test investment strategies, while another 20% utilize AI for real-time monitoring and adjustment of investment positions. These figures are expected to rise significantly in the future: 76% of investors anticipate using AI for strategy development and testing, and 55% expect to employ AI for real-time portfolio monitoring.
The vast majority of institutional investors find AI's most attractive advantages to be accurate and timely market insights, improved risk management, and enhanced efficiency and automation. Their primary concerns revolve around complexity, data quality, and completeness.
Regarding the benefits and challenges of AI in systematic strategies, most intermediaries cited improved risk management and adaptability to rapidly changing market conditions as key advantages. However, over 60% of respondents identified implementation costs, model complexity, and interpretability as major barriers to AI adoption.
The Invesco Global Systematic Investment Study is based on insights from 130 institutional and intermediary systematic investors, representing a total of $22.5 trillion in assets under management.
Regional attitudes toward AI and natural language processing (NLP) vary significantly, with investors in Europe, the Middle East, and Africa being notably more skeptical than their counterparts in Asia-Pacific and North America.
The study highlights that half of Asia-Pacific respondents are using machine learning and AI as systematic tools for portfolio construction, surpassing North America's 35% and the global average of 30%. In contrast, only 12% of EMEA investors reported such usage.
Additionally, investors in Asia-Pacific and North America are more inclined to integrate AI throughout the entire investment process. In using AI to identify market behavior patterns, Asia-Pacific and North American investors reported adoption rates of 65% and 48% respectively, compared to 33% in EMEA. For real-time position monitoring and adjustment, the figures were 35% and 20% in Asia-Pacific and North America, versus just 10% in EMEA.
In the application of various NLP technologies within investment processes, Asia-Pacific and North American investors are leading those in Europe, the Middle East, and Africa (EMEA).
More importantly, Asia-Pacific investors are more convinced of AI's importance in investing. 73% of Asian respondents believe AI will be as important as traditional analytical methods in the next decade, while 20% think AI will even surpass traditional investment analysis methods. North American investors show similar trends, but the EMEA region remains more conservative, with only 51% believing AI's importance will match traditional methods in ten years.
Andre Roberts, Senior Portfolio Manager of Quantitative Strategies at Invesco, commented: "Many Asia-Pacific investors developed and matured later compared to their EMEA and North American counterparts, giving them greater organizational flexibility and motivation when adopting new tools like AI and NLP in investment processes. This is still a rapidly evolving field of systematic investment, and as investors become more familiar with these tools, I expect the regional gaps in AI adoption will gradually narrow."