Last year, the Irish Funds FinTech Specialist Group identified significant opportunities offered by both generative artificial intelligence (GenAI) and more traditional machine learning models. They highlighted a wide range of use cases where the new technology can be utilised but experts say there are significant challenges when it comes to adopting AI within the funds industry.
According to Thomas Conlon, professor of finance in the School of Business at University College Dublin, elements of AI are already being used across the investment management sector.
“For example, machine learning is being used to help generate excess returns, to optimise portfolios and to manage risk,” he says. “Natural language processing is employed to understand market sentiment, to summarise information from large documents and to automate reporting, and generative AI, such as ChatGPT, is used to create content, to write code and to do scenario analyses.”
This, Conlon notes, highlights the wide-ranging applicability of AI to the funds industry but he believes fund management will struggle with adopting AI due to the centralised approach being taken.
“While not limited to the US, much of the innovation is coming from Silicon Valley and there has been a focus by many of the big players on black-box models,” he says. This creates challenges for fund managers in protecting their intellectual property (IP) and makes it difficult for them to truly differentiate themselves.
Mary Ruane, partner and asset and wealth management leader with PwC Ireland, also highlights a number of use cases for the technology within the funds industry, noting that these range from simple administrative tasks to free up time, to predictive analytics that offer new insights.
“AI and especially GenAI has been highlighted for its role in real-time data analysis, uncovering deeper market insights and improving decision making,” she says. “AI-driven tools streamline operations by automating repetitive tasks such as fund administration, compliance reporting and data reconciliation. Predictive analytics powered by AI aids in portfolio optimisation, proactive risk management and scenario planning.”
Additionally, AI simplifies compliance processes by automating regulatory filings and monitoring changes in real time, while the combination of GenAI and blockchain is also revolutionising private markets through tokenisation.
Ruane says Ireland‘s funds and asset management industry is progressively embracing AI and GenAI, with notable advancements in operational efficiency, data analysis and decision making, but we need to do more to keep pace with this rapidly evolving field. For example, following on from GenAI, the next evolution in artificial intelligence is agentic AI, building on those capabilities of GenAI by introducing autonomous decision making and continuous feedback loops.
“In the funds industry agentic AI is seeking to transform operations by enabling real-time data analysis, adaptive investment strategies and automated risk management,” Ruane explains.
This shift will allow financial institutions to enhance efficiency, reduce costs and improve customer experiences, positioning agentic AI as a pivotal force in navigating the complexities of modern finance.
According to Ruane, continued investment in AI infrastructure, workforce upskilling and fostering innovation across public and private sectors is essential for Ireland when it comes to embracing disruptive technology.
“Ireland‘s strong tech ecosystem and being at the forefront of the funds and asset management industry provides a solid foundation for future growth, but strategic efforts are needed to fully realise AI’s potential in the industry,” she says.
Disruptive technologies such as AI and GenAI, as well as distributed ledger technology (DLT), big data and cloud computing, remain crucial for boosting efficiency and performance and Ruane says their influence is growing.
“These innovations are not only enhancing operational capabilities but also transforming offerings, revenue models and business frameworks within the industry,” she says. “A remarkable 80 per cent of the 264 asset and wealth managers we surveyed as part of our PwC Asset and Wealth Management Revolution 2024 Report noted that disruptive technology is fuelling revenue growth – nearly as many as those who observe improvements in operational efficiency.
“What’s more, seven out of 10 highlighted the pivotal role of disruptive tech in driving product and service innovation, as these technologies transition from supporting back-office functions to playing a more prominent role in customer interactions.”
The danger is, of course, being left behind. “For early-stage adopters there was a competitive advantage to AI but this is rapidly becoming a strategic necessity,” says Conlon. “The prevalence of inexpensive exchange traded funds means that fund managers are now competing on cost and embracing AI allows companies to pass on the benefits of AI-driven automation to customers where it really matters – their pockets.”
