Technology in the Investment Industry: Roles and Applications

Challenges and Opportunities posed by new technology

Over the last decade, digital has become mainstream. Distribution models have evolved and disruptors have attacked the most profitable parts of the industry. Technology startups are nimble and don't have the legacy issues (or costs!) of incumbents. Consequently, industry margins have been squeezed as significant investment in new technologies is essential, while fees and other sources of income have come under pressure through efficiencies or automation.

This collection of papers outlines several of the challenges the investment industry faces, whilst also showcasing how technology can have positive outcomes. These include: more detailed analysis of data in the investment process, enhanced distribution of product and information to customers, and efficiency gains through digital regulatory reporting.

Global Markets Pulse Survey (State Street, Jan 2020)

State Street surveyed over 100 asset managers to get their views on the year ahead. Information technology issues featured prominently, more than half anticipated integrating distributed ledger technology (DLT) into trading processes, and a similar number expected DLT and tokenization of traditional assets to improve financing, operational and risk management returns.

2020 Investment Management Outlook: Crossing boundaries for profitable growth (Deloitte)

Deloitte investigates the challenges facing investment management firms and finds those willing to 'cross traditional boundaries' by upgrading technology to reimagine growth, operational efficiencies, and client experiences are more likely to succeed.

Top Technological Trends in Capital Markets: What you need to know (Capgemini, 2019)

Capgemini outlines how 'quantamental' investing approaches and digital security tokens are going to impact aspects of asset management, and how the adoption of data-driven compliance will ensure standards in the use, distribution, and protection of valuable customer data.

2025 Vision: Delivering for customers and the economy (The Investment Association, 2019)

The Investment Association sets out, in this policy report, the key elements that are driving the investment industry and critical actions that are necessary to achieve good outcomes. Technological change is seen as being revolutionary-transforming every aspect of the industry from investment decision making to client experiences

The insurance switch: Technology will reshape operations (McKinsey & Company blog, 2019)

McKinsey & Company suggests that as insurance companies allocate significant resources to technology functions, they need to ensure that other parts of the business adapt and change too.

AI applications in financial services (Hermes IM, 2019)

Hermes IM examines the arguments both in favour and against the application of artificial intelligence (AI) in asset management, banking and insurance.

AI Pioneers In Investment Management (CFA Institute, 2019)

This CFA Institute report seeks to identify high impact applications of artificial intelligence (AI) and big data in investments. Somewhat surprisingly, they find that relatively few investment professionals are currently exploiting AI and big data applications in their investment processes.

How technology will redefine relationships with asset management clients (Deloitte, 2020)

Deloitte explores how the role of technology in asset management is changing the worldwide distribution of good and services and outlines four key considerations for the asset managers of tomorrow.

Financial Services Technology 2020 and Beyond: Embracing disruption (PwC)

In this paper, PwC outlines the accelerating pace of technological advances across financial services, analyses its implications and risks, and makes suggestions as to how businesses may best adapt.

The Next Generation of Data-Sharing in Financial Services (WEF/Deloitte, 2019)

Deloitte and the World Economic Forum combine to provide a high-level overview of how privacy-enhancing techniques work and how they can unlock value across a range of financial institutions, including asset managers, banking and insurance companies.

New technologies changing asset management (BlackRock, 2019)

For compliance reasons, this paper is only accessible in the United States

BlackRock outlines four key lessons about making the most effective use of advanced technologies to analyze 'Big Data' within an investment process.

An Introduction to Machine Learning for Investment Management (Man AHL, 2019)

In this paper by Man AHL, they highlight how machine learning can play several beneficial roles in investment management, where there are big data sets to profitably mine. They note that an 'ESG factor' may indeed exist!

Machine Learning and Investing, part 2: Clustering (OSAM, 2019)

Kevin Zatloukal of O'Shaughnessy Asset Management demonstrates how machine learning can be successfully applied to help build a value investing strategy that has delivered consistent outperformance over two decades.

Wealthtech Trends 2020: The future starts now (Xtiva)

Xtiva notes how digital technology is transforming almost all aspects of the investment and trading environment, while also transforming and disrupting the business models of the wealth industry. This collection of industry participant insights showcases the many and varied ways in which technology can and is affecting the wealth industry.

Asia's ESG investing, data integrity and technology (The Economist, 2019)

The Economist Intelligence Unit (EIU) surveyed over 300 investment institutions located in Asia to find out the degree to which artificial intelligence (AI) is being deployed, how it is used and what further capabilities it may have in aiding the ESG decision making process.

The New Risks of FinTech and the Rise of TechRisk (2019)

The authors note the rise of digitization and datafication and new technologies in financial markets, and argue that cybersecurity and technological risks now pose significant threats to financial stability and national security. They suggest basic principles of how such risks can be monitored and addressed, and focus on the role of regulatory technology (RegTech).