Will fund managers soon be retiring as artificial intelligence becomes increasingly prevalent and consistently outperforms the market? Or is this notion exaggerated? Investment Officer spoke to Thomas Dierckx, a financial machine learning expert at Kairon Labs.
The role of AI in pioneering investment strategies and refining existing methods is undisputed. The ever-growing data mountain becomes more manageable with AI’s involvement. This includes macroeconomic figures, company data, and diverse sources like social media, satellites, and machinery.
“Our brains are overwhelmed by this data deluge,” begins Dierckx, a specialist at crypto market-maker Kairon Labs and a recent PhD graduate from the Catholic University of Leuven, Belgium. “AI is essential for comprehensively analyzing complex entities like Apple, outperforming human capabilities and constantly improving through machine learning.”
Countering emotional bias
AI’s prowess extends to uncovering intricate, previously hidden patterns. “AI systems tirelessly assess vast data arrays, enhancing investment portfolio performance and forecasting potential changes or risks,” explains Dierckx.
AI’s objectivity also counters the ‘emotional bias’, a notorious investor pitfall. “Even seasoned investors are not immune to certain behavioral patterns, despite their professional detachment,” Dierckx adds.
However, practical application varies. “There’s a disparity in the industry’s adoption pace. Only the most forward-thinking asset managers are deeply integrating AI into their workflows,” he observes.
Human element
Despite AI’s advancements, human involvement remains crucial. “People often prefer personal interaction, especially for nuanced discussions in finance,” Dierckx notes.
“The future of roles like personalized portfolio managers might shift towards AI, offering superior efficiency and cost-effectiveness. However, the necessity for human oversight in fund management persists, especially in assessing unforeseeable events.”
Dierckx is skeptical about AI’s ability to consistently outperform the market. “Historically, passive strategies often excel over active ones. The likelihood of AI revolutionizing market performance, especially for firms already struggling with active management, is limited.”
AI, however, will enhance market efficiency and challenge performance benchmarks. “For many, AI will primarily automate processes and cut costs rather than outdo the market. Platforms claiming market-beating capabilities should be approached with caution,” he concludes.