December 10, 2024 — More than half of institutional investors in Europe and Asia have not yet spoken to any of their asset management providers about how managers are implementing artificial intelligence (AI) into their businesses and investment processes.
AI is transforming the way individuals and organizations invest and transact. More than 60% of the institutional investors participating in recent research from Coalition Greenwich believe AI will have a significant impact on the way they and their managers conduct research and formulate investment ideas and they believe AI has the potential to transform portfolio optimization, risk management and other critical investment functions.
Despite those beliefs, two-thirds of institutional investors in the U.K. and roughly 55% of institutions in Continental Europe say they have not had any discussions about AI with their asset managers. In Asia, close to 60% of institutions have yet to broach the subject of AI with their managers.
“It’s time for institutional investors to engage on AI,” says Mark Buckley, Global Head of Investment Management at Coalition Greenwich. “Not only do institutions have a fiduciary responsibility to keep up with changes in manager investment processes and business practices, but they also have a valuable opportunity to pick the brains of some of the smartest individuals and organizations in the industry to learn about how they are applying AI.”
AI Will Be Key to Meeting Institutional Needs
On the whole, institutional investors are reasonably satisfied with asset managers’ technology implementation. Two-fifths of investors think that managers have delivered very well against expectations regarding technology enablement over the last five years. Examples of successful manager technology delivery include enhanced reporting, automation and process optimization, and advanced analytics. Almost 80% of institutions say manager technology innovation has improved reporting and portfolio analysis capabilities.
Going forward, AI-driven applications will play a critical role in determining how well or how poorly asset managers meet the needs of their institutional clients.
“In addition to potential impacts on the investment process, managers have an opportunity to harness AI to deliver customized solutions, automated processes and enhanced portfolio analytics institutions now demand,” says Mark Buckley.
Coalition Greenwich Study
Coalition Greenwich interviewed 121 institutional investors in Asia and Europe to gather in-depth feedback on a range of topics including how well asset managers have delivered on technology against expectations, how investors use client portals, and how AI is anticipated to impact managers’ business processes and operations. Interviews took place between February and September 2024.