Artificial intelligence embracement

By Yu Xi Source:Global Times Published: 2017/8/7 16:28:39

Fund managers utilize AI to meet customer demands, but experts predict it will not become the ultimate decision-maker

Photo: IC

An increasing number of fund management companies have started to leverage artificial intelligence (AI) technology and big data to offer customized services in China. Experts agree that the technology could soon become a trend as it can help fund managers grasp the latest market information and large amounts of user data. But AI may only be used as a supplementary tool in the domestic market and may not hold up as the ultimate decision-maker.

The artificial intelligence (AI) industry is flourishing.

Initially, people became increasingly familiar with the application of such technology, particularly in the auto, retail and medical treatment sectors.

Now, it is gradually being applied within the sales of fund management products by more and more domestic fund management companies.

To meet potential market demands, Ant Fortune, an investing app of Alibaba Group Holding's financial affiliate Ant Financial, unveiled Caifuhao, or "Fortune Account," in June to allow third-party financial institutions to set up online stores within the app.

Currently, a total of 18 fund management companies have entered the platform, including Beijing-based China Asset Management, Shanghai-based Huaan Funds and Guangzhou-based E Fund Management Co.

So far, those fund management companies have seen their average daily trading volume increase 243 percent since June, according to an interview reply Ant Financial sent to the Global Times Thursday. The company, however, didn't provide the total trading volume.

Rising trend

Alibaba is not the only firm in China that is trying to introduce AI to the financial sector. Some domestic traditional financial institutions have also jumped on the bandwagon.

In December 2016, China Merchants Bank rolled out its robot advisor feature, Mojie app, which pre-selects a certain range of assets and automatically trades them.

So far, the app has accumulated more than 5 billion yuan ($743.7 million) worth of assets, becoming the largest robot advisor in China, according to media reports.

The application of AI technology in the financial sector is becoming a trend as the technology can help provide services focused more on customers' needs rather than on clients' assets, an Ant Financial spokesperson told the Global Times.

For example, Ant Financial can label customers with different features based on the types or the amount of funds they have bought. And these data can be accessed by fund managers to help them send promotion banners to targeted consumers. But the company stressed that they will protect customers' personal information.

One of the first fund managers to enter the Caifuhao platform, Beijing-based Tianhong Asset Management Co, of which Ant Financial holds 51 percent controlling stakes, said in a note posted on its website in July that the company regards AI technology as a strategic priority in providing consumers with tailored services.

Overseas fund managers have also weighed in. In February, New York-based Goldman Sachs Asset Management introduced an investment trust to Japan. The product uses AI to sort through large amounts of data and selects promising investment targets, according to media reports.

BlackRock, another New York-based fund company, announced in March that it would cut more than 40 jobs, replacing some of its human portfolio managers to instead rely on algorithms and models to pick stocks, according to a Fortune report in March.

A promising future

AI-based fund management sales could prove to be a promising market. Experts believe that the AI-driven systems have advantages in information filtering and data collection.

Through AI, fund management companies could "grasp the latest market information, huge amounts of user data as well as saving operational costs," Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology, told the Global Times on Thursday.

Goldman Sachs predicted in a report issued in December 2016 that machine learning and AI can create $34 billion to $43 billion worth of value annually by the end of 2025 via saving costs and bringing new profit-making opportunities.

Dong also noted that AI technology might be helpful in risk control and the evaluation of investment returns as well. 

Consumers "only care whether the fund product can generate returns at a reasonable level," said a 36-year-old fund product buyer in Shanghai surnamed Liu.

"Sometimes, wealth management products recommended by salespeople from financial institutions are not really what I want," Liu told the Global Times on Sunday. "If AI technology could help us choose profitable wealth management products, why not take it?"

Mature financial market needed

"Given the mature investment environment in the West, large international fund management companies with rich investing experience could provide more tailored AI products than their Chinese counterparts could," said Dong.

He noted that the domestic financial market needs more improvement in terms of information disclosure and system optimization, otherwise domestic financial institutions cannot fully depend on AI to make decisions. 

Qiu Yanying, an investment director at Beijing-based Pinjin Asset Management Co, also took a cautious attitude toward AI technology.

Personally, "I will not totally depend on the technology of AI to make decisions. I prefer to use it as a [supplementary] tool instead," Qiu told the Global Times on Thursday.

AI is capable of dealing with and calculating large amounts of data, which could provide historical data objectively and help investors make decisions, said Qiu.

In the short term, fund managers will not be replaced by AI technology in China because they still play important roles in making judgment on a company's operation and brand value, Qiu noted.

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