What: AI is used in finance to make decisions in addition to red tape.

Why it is important: While some are basing their reasoning on AI-powered tools, others do not believe that AI will help on on the longer run when it comes to building a strategic vision.

Asset management firms are increasingly incorporating artificial intelligence (AI) into their operations to enhance investment decision-making and identify profitable opportunities. JPMorgan plans to deploy a generative AI tool named “Moneyball” within its $3.2 trillion Spectrum portfolio management platform to highlight potentially suboptimal decisions by portfolio managers, like premature stock sales. This tool aims to counteract biases and refine decision-making by reflecting on past market and manager behaviors.

Other asset managers are also embracing AI. For instance, Voya Investment Management uses a virtual analyst to assess stock risks, providing portfolio managers with a combination of human and AI-driven insights. This AI tool has proven effective, offering high-value alerts that complement human judgment. Legalist, a hedge fund specializing in litigation finance, employs an AI tool called “Truffle Sniffer” to sift through court records and identify promising investment targets based on likely favorable outcomes.

Moreover, the LQAI ETF, managed by LG and Qraft Technologies, utilizes AI for stock picking and generates monthly reports that explain its investment strategies, focusing on resilient and technologically advanced companies.

Despite these advancements, there is skepticism regarding AI's ability to deliver long-term investment returns. David Giroux from T Rowe Price argues that AI is mainly effective in gaining short-term advantages rather than predicting long-term earnings, suggesting limitations in addressing market inefficiencies over extended periods.

AI is promoted from back-office duties to investment decisions