Artificial Intelligence (AI) is revolutionizing the financial world by optimizing asset management, identifying opportunities, and supporting strategic decisions. FlexFunds breaks down the keys to adopting these technologies in the sector.
In recent years, asset management has radically changed, driven by the personalization of financial vehicles and diversified portfolios. Technological tools like AI allow managers to be more efficient and comply with regulations. Deloitte’s report, “How technology empowers success in the alternative assets market,” highlights that automation is key to managing risks, meeting regulations, and reducing operational costs.
Likewise, liquid assets and alternative instruments are benefiting from these tools in the structuring of portfolios to boost performance in options like stocks, bonds, mutual funds, and other financial securities alternatives.
In this context, technological solutions also contribute to the distribution and growth of investment products for asset managers, although the activity still requires significant human oversight, explains FlexFunds, a leading service provider for the management of securitized assets.
FlexFunds uses advanced technologies to structure personalized investment vehicles that can enhance the global distribution of investment strategies. In their view, AI could be a determining factor for the future of managing and structuring investment instruments in the coming years.
According to Mercer Investments’ 2024 global managers’ survey, 91% of managers are already using or planning to use AI in their investment strategies. The areas with the greatest potential are stocks, hedge funds, and digital assets, where AI drives value creation.
Operational efficiency and strategic decision-making
Asset managers can take advantage of AI by improving operational efficiency, user experience, and investment processes, enabling financial products to be adapted to client needs consistent with their risk profile and investment horizon. According to BlackRock, this increases the quality of data and financial instrument analysis.
Additionally, AI can assist the manager during decision-making in the investment process by quickly identifying patterns and insights. For example, with an instrument like an ETF (exchange-traded fund), AI models can help decide how to weight allocations within a given index, facilitating management and enabling more accurate replication of it.
The AI race in the global financial sector
Consulting firm IDC projects that global spending on AI will reach $500 billion by 2027. The financial sector could benefit greatly, especially in fraud detection and financial forecasting. As explained by S&P Global, up to 40% of financial firms already rely on machine learning for these use cases.
Generative AI, capable of creating original content from existing data, could generate up to $340 billion annually for the global banking sector, increasing productivity and offering more personalized products and services.
S&P Global’s report also notes that AI will contribute to the creation of hyper-personalized products and services and facilitate the technological modernization of financial entities. These advances will allow asset managers to better meet regulatory requirements, improve portfolio diversification, and increase efficiency in the distribution of investment products.
The impact of AI on asset management
A report by the CFA Institute Research Foundation highlights that the success of AI in asset management depends on its ability to detect complex patterns and process large volumes of unstructured data, improving forecasting accuracy. This technology also has the ability to self-improve, eliminating the need for manual reconfigurations. However, they warn that AI can fail if data quality is low,or tasks are too complex.
Despite the challenges, artificial intelligence is transforming the way managers structure and distribute financial products, promoting efficiency, diversification, and personalization in an increasingly competitive market.
In conclusion, FlexFunds emphasizes that, although AI presents challenges, its ability to process large volumes of data and continuously improve its performance is redefining how asset managers structure and distribute their financial products in an increasingly competitive global market. In this landscape, artificial intelligence tools and other technologies are fostering greater efficiency, diversification, and personalization in investments while enhancing strategic decision-making.
For more information on how FlexFunds uses advanced technologies to structure personalized investment vehicles that can cost-effectively expand access to international investors, write to us at info@flexfunds.com.
