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How FinTech is Shaping Investment and Asset Management How FinTech is Shaping Investment and Asset Management

The increased interest in fintech management is also contributed to by the high amount of fees charged by active managers who nevertheless are no match for robo-advisors.

Australia’s funds management industry is the largest in the Asian regionAustralia’s funds management industry is the largest in the Asian region

Australia’s funds management industry (also referred to as “managed funds” or “investment funds”) is the largest in the Asia-Pacific region and the sixth largest in the world, according to the survey produced by Washington-based Investment Company Institute.

Robots, Artificial Intelligence to make many fund managers obsolete: expertRobots, Artificial Intelligence to make many fund managers obsolete: expert

Google is likely to harness its massive financial and data firepower to emerge as a funds management powerhouse, a global finance guru has warned, as artificial intelligence and robots make obsolete many of the world’s highly-paid fund managers.

Robots, Artificial Intelligence to make many fund managers obsolete: expert

March 30, 2017

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By Adam Creighton, Economics Correspondent - The Australian Business Review

Google is likely to harness its massive financial and data firepower to emerge as a funds management powerhouse, a global finance guru has warned, as artificial intelligence and robots make obsolete many of the world’s highly-paid fund managers.

Jonathan Wilmot, one of the world’s top asset management experts, said access to data and scope to deploy artificial intelligence would become massive competitive strengths in the battle to manage over $US70 trillion of financial assets worldwide.

“Officially Google and Deep Mind (a Google subsidiary) are not working on investment, I’m not sure how many of you believe that — I don’t,” he told the Credit Suisse annual investment conference in Hong Kong today.

These are the competitors “to be really scared about”, Mr Wilmot told the conference of more than 2000 investors and bankers.

“(They) have access to data and they have enough money to buy financial data sets and have others they can mine to use these techniques,” he added.

“These guys have the highest credibility and the deepest capacity to apply machine learning techniques to funds management. They have a lot of cash in this low return world. And they don’t like paying people fees.”

His comments came as BlackRock, the world’s largest fund manager, announced job cuts across its stock picking divisions.

Mr Wilmot said the US firm was “investing heavily in data science”.

“I don’t think we’ll need as many humans to manage our assets when people get really good at these techniques,” added the 40-year fund management veteran, who was formerly head of macro investment at Credit Suisse.

His comments also follow release of a Productivity Commission report on how to cut the cost of managing Australia’s $2 trillion in superannuation. The prospect of AI in funds management would have a huge impact on Australia, which has one of the largest funds management sectors in the world with among the highest average fees.

Mr Wilmot said he expected AI to play a greater role as increasingly popular passive investment strategies failed, and as poor equity and bond market returns — inevitably in his view — set in over the next decade.

“A standard passive portfolio might be low-cost but also low-return,” he said, pointing out the strategy was on track to steer a fifth of the $US77 trillion assets under management by 2020 — more than double the share of 2008.

“These machines are beyond human in ability to process large data sets. They don’t have the context or intuition that human beings do but we do know that the guys at the very edge of this revolution basically believe machines will be able to do it all at some point,” he added.

A lack of trust and transparency of machines would be the biggest road blocks to AI in funds management, along with regulators’ reluctance to let them do the work, would be major roadblocks, he said.

“It doesn’t matter how powerful this stuff is, it’s going to be really hard to trust it on a big scale, especially with large amounts of money,” he explained.

Mr Wilmot cited renowned psychology professor Gary Marcus at New York University who has said 75 per cent of people eventually won’t be working or a living.

“First time in history I know of that human race contemplates possibility of no longer being the most intelligent beings on planet,” he said.

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