Generative AI is making its way into the wealth and asset management sector, revolutionizing traditional financial practices. Raelan Lambert, Mercer's Global Alternatives Leader, appears on Wealth! to explore how the technology is changing the world of finance.
Lambert emphasized that the impact of AI in finance will depend on “where managers choose to embed it in their process.” The technology is being used to create innovative investment strategies, enhance data analytics capabilities and optimize overall portfolio management, ultimately improving the investment experience for clients.
Lambert adds: “Managers are finding ways to integrate the technology into their data rooms and investor reporting. [spent on routine tasks]”With this, we can provide even more value and analysis into other aspects of portfolio considerations.”
For more expert insights and the latest market trends, click here to watch this full episode of Wealth.
This post Angel Smith
Video Transcript
HNWIs and asset management institutions have been at the forefront of adopting innovative technologies such as Gen. A. I tools, with nine in 10 managers currently using or planning to use I in their investment process, according to consulting firm Mercer.
So the question remains: how do managers implement AI capabilities into their day-to-day investment strategies?
At the very least, our next guest has an opinion here.
We are joined by Raylan Lambert, leader of Mercer Global Alternatives.
I'm so glad you came to the studio.
Brad.
thank you.
Let's talk about this.
That is, how much of a role can I actually play in those investment decisions?
And they brought with them the world of finance, so to speak.
Well, it really depends on where managers choose to incorporate them in the process.
You know, five or 10 years ago, the focus was on data science.
And how can we mine the information we have to provide better information and reporting?
But today I took it all to a whole new level.
So, we are seeing managers deploying this when it comes to identifying and screening new investment opportunities.
You know, they might be looking for certain criteria, for example, the mid-market or a certain segment of the economy, and they use that in that regard.
But what's fascinating is that we're also using it to look at our entire portfolio and understand the data and ownership that we collectively hold.
So how do you connect the dots of that data to bring new products and solutions to market on your clients’ behalf?
So, is this something that clients directly engage with or is this something that managers use and leverage as a tool to say, “These are investment decisions that we've made in the past.”
This is the portfolio mix or risk trends that you can add or where you need to mitigate some of the risk that you currently have in your portfolio – so where is this touch point happening.
At least in its simplest form, touchpoints happen in two places, right?
One is how managers are integrating I into their investment decision-making. As I mentioned, managers are using data to think about how to generate new ideas across their portfolios. The second big thing is that managers are using I, and so are their limited partners.
You know, as investors in these manager funds, we want lots of data, and we want instant data.
So managers are also exploring how to integrate the technology into their data rooms and report information to investors.
Well, it's about reducing time and allowing you to deliver more value.
Add analysis on other aspects of portfolio considerations.
So that applies not only within their own portfolios, but also in reporting and monitoring and updating investors.
Now, what are the initial returns that we've seen, how do they differ between a portfolio with an artificial intelligence layer and a portfolio with an artificial intelligence layer?
And here is the performance of the portfolio with this layer added: We haven't seen anything like that classified yet.
Uh, you know, as I mentioned at the beginning, the 90% statistic that we found in our survey, 90% overall, is that about 40% of managers are still considering incorporating it into their process.
So I think where it really starts to show up is when companies are probably seeing dividends being cut.
So our main focus right now is on improving EBITA.
How can these managers add value to the firm's EBITA?
The more time that passes, the more focus there is on EBITA because if you sell the company a year later at the same valuation, your profit margins are already 300 basis points lower.
So I think that's an important point when we're looking at the levers of value creation.
Managers need to add value to the portfolio.
At some point, if you look at I as one of those levers, how are they using it to increase productivity, streamline processes, and reduce other costs in their business?
In that sense, I'd like to see what happens next.
However, there are no signs of this yet.
In terms of actual measurability, I think it's still early days, as long as I'm not embarrassed about the deals I'm making.
This will have a further adverse effect on the portfolio's performance metrics.
Thank you very much for your time.
Thanks, Brad.
thank you.
It will be led by Mercer Global alternative Raylan Lambert.
