For the most part, funds that utilize artificial intelligence lag behind investment products managed by humans, as shown by a new comparison. However, asset managers should not be lulled into a false sense of security.
Since generative artificial intelligence (AI) successfully penetrated the mass market last year with chatbot ChatGPT, there is also a certain level of fear among asset managers.
New versions of the service can put together investment portfolios in no time at all and replicate the strategies of prominent professional investors, provided the relevant data is available.
AI Also «Shorts»
A comparison conducted by the German «Handelsblatt» (article behind paywall) will likely come with some relief. The business newspaper analyzed how 17 AI-dominated investment products from a total of 13 providers performed last year when compared to actively managed products.
The providers include classic asset managers and fintech firms. The products are mainly investment funds but also include a certificate. Equity strategies dominate here.
Some of these products rely on falling prices, which means they follow a «short» strategy. Some fund managers make use of different algorithm models at the same time, which then also work with bonds, currencies, and raw materials, for instance, as well as special hedging mechanisms.
Just One Obstacle Remains
The result: the returns from the majority of the AI-managed products were under average, and some providers have already dropped the idea entirely. There are exceptions, however, sometimes with clear, two-figure returns, warned the newspaper.
This means that our flesh-and-blood fund managers should not celebrate too early. Successful pioneers are benefiting from the current hype around the technology of tomorrow. And behind the scenes, the upgrading of AI is advancing at high speed with increasing computational power. Soon, regulation will be the only obstacle to the widespread use of AI in finance.
