Can AI positively boost asset managers’ AUM?

Investment managers who plan to implement artificial intelligence (AI) in the next five years expect to see increased productivity, but views are mixed on whether it will positively affect revenue and assets under management (AUM). 

Mercer’s report, AI Integration in Investment Management, questioned 150 asset managers across various asset classes.

The results are divided between those respondents who are already using AI at their businesses and those who expect to use AI in the next five years.

Rather than reducing headcount, firms are optimistic that there will be a need for greater experienced skill sets instead. Some 72 per cent of those managers already using AI and 80 per cent planning to use AI in the next five years said it would necessitate recruiting new skill sets. 

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Over half of both groups said they expect their firm’s headcount to remain constant, with only 18 per cent and 19 per cent, respectively, expecting it to decrease. 

“On a five-year view, more than half of managers (55 per cent) currently using AI and those that plan to (52 per cent) do not expect AI to affect overall headcount across their organisation. 

“However, managers currently using AI (72 per cent) as well as those that plan to (80 per cent) believe AI will increase the need to recruit staff with new skill sets, and to find and retain the right talent (64 per cent and 52 per cent, respectively).

“Managers do intend to hire more specific skill sets during this period, however, as firms focus on the skill sets required to deliver the next phase of their investment proposition.”

Moving on to whether it will affect the financials of an investment manager, respondents are roughly divided on whether it will have a positive impact, particularly as it can involve high start-up costs. 

Of those who already use AI, 46 per cent said they anticipate it will increase revenue and 46 per cent think it will increase AUM. For those who anticipate using it in the next five years, 45 per cent expect it will increase revenue and 43 per cent expect it will increase AUM. 

The vast majority (93 per cent) of both groups expect it will increase productivity.

“Though expectations of productivity gains over the next five years are widespread across the manager universe, views on AUM and firm-level revenue impacts are much more divided. 

“AI has a significant upfront and ongoing costs; if its integration does not deliver desired productivity gains, lowering unit labour costs, firms will experience margin contraction. Firms that continue to rely on manual processes may experience higher operational costs and greater inefficiencies relative to those realising efficiencies across their operations,” said Ana Kreacic and Simon Luong of Oliver Wyman Forum.