- Asset managers need to improve their messaging about how technology impacts the investment process, a new BlackRock survey of institutional investors found.
- Investors are seeking more clarity around how investment staff and technology work together.
- Only a quarter of investors say technology is an important factor in choosing a new active equity manager.
While buzzwords like artificial intelligence and big data have generated no shortage of hype, a majority of investors say they’re not totally sold on the ability of technology to deliver better returns.
Only a quarter of 225 institutional investors surveyed by BlackRock in a new report ranked use of technology in investment decision-making as an important factor in choosing an active equity manager. More than half, by contrast, said risk management strategy was important, while fiduciary record and access to new asset classes also ranked more important than technology.
"What we heard from investors was that while they see the importance of using the latest technology, the most important piece of that is the value back to the client," Nicole Mossman, BlackRock’s senior product strategist for active equities, told Business Insider. "How does it actually benefit them? There’s a little bit of skepticism – are these just buzzwords? Is this just a fad?"
More than half said that technology is extremely or very important in assessing a prospective equity manager. But they want to see more concrete evidence about how managers are actually using it.
“I’m interested in AI and big data if they are right for a particular strategy,” the director of investments for a $2.6 billion US foundation said in the survey. “However, I want to hear more than buzzwords from managers — I’m looking for a lucid explanation of how it’s going to help me and be additive to our strategies.”
Investors frequently ask BlackRock about the interplay between technology and investment staff, which Mossman said complement each other.
"From our standpoint, what’s very important to us is not just the talk of these examples of big data and artificial intelligence; it’s about the culture you’ve set up – how are the people involved in it?" she said. "It’s not something dislocated from the process or the people."
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To help investors understand technological advances in investments better, BlackRock held a three-city event last year, diving into what big data is – and what it isn’t. The firm also hosted a technology-focused client conference last month in San Francisco, where attendees participated in a virtual reality demo of how BlackRock uses big data in the investments process.
Mark Wiseman, BlackRock’s head of active equities, "has talked about this a lot: we have to constantly innovate and push ourselves, otherwise we’ll get left behind," Mossman said. "Our clients have walked away feeling the same thing. We have to find ways to embrace technology and make it additive.
Other asset managers have been skeptical of new technology. The head of technology for asset manager Cohen & Steers told Business Insider last month that aartificial intelligence is "right in the middle of a hype cycle." Instead of investing in AI, the $54.8 billion firm is focused on building its infrastructure.
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See Also:
- $650 billion asset manager Franklin Templeton is embedding data scientists in a key investment team, and it’s a sign of how the industry is changing
- $5.3 trillion fund giant Vanguard hired a new strategy chief, and it highlights one of the hottest new hiring areas at trillion-dollar asset managers
- Large asset managers are thinking about farming off some of their trading desks, and it could be a gold mine for custodian banks and prime brokers
Source: Business Insider – feedback@businessinsider.com (Meghan Morris)