Like in every other sector, technology is enhancing fund management, and asset managers are rapidly adopting to the use of technology in fund management. The adoption of these technologies has been propelled by the outbreak of Covid-19 pandemic. Adoption of technology in assets management is leading to increase in automation of many functions of asset managers such as in data management, risk assessment, market research and analysis, asset trading, customer services, etc.
Fund Management Technologies
There are currently 7 frontier technologies that are enhancing fund management
- Artificial intelligence (AI)
- Big data
- Blockchain
- Cloud technology
- Application programming interfaces (APIs)
- Remote working technologies
- Internet of Things (IoT)
Artificial Intelligence
Assets management has already witnessed the impact of AI with the advent of robo-advice. Investment management companies have started deploying automated service delivery and robotic customer service delivery using AI.
The application of artificial intelligence in fund management can and will improve the entire value chain, starting from optimisation of sales and marketing, predictive market modelling and portfolio management based on instant processing of huge data, to the use of bots for transaction processing across the entire middle and back office. Use of AI bots enhances speedy and efficient transaction processing and reduces cost of labour.
Although the application of artificial intelligence technology like robotics in fund management as well as in other sectors appears to be a replacement of humans in labour force, but the truth remains that humans remain indispensable in the whole process.
Technologies like AI, powered by big data and secured by blockchain, will no doubt be more effective at making asset management decisions and executing them. However, functions like devising a long-term strategy, making complex decisions, and governing the technology mandate will always need human contributions.
Blockchain
Blockchain is a database of shared records for multiple users, designed in a manner that its security, increased transparency and efficiency can benefit all users.
Blockchain technology has wide application in human endeavour which fund management is not left out. Blockchain has the capability to store data in a synchronized and decentralized manner which can help fund management agencies in complying with regulatory guidelines.
Blockchain can significantly reduce the conflict cost of asset managers, leading to potential reduction in charges for investors. It can as well provide avenue for improvement in data and identity security and seamless regulatory compliance and reporting functions of the fund managers.
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Cloud Technology
Cloud technology is assisting in decentralized data warehousing. Assets management companies are beginning to take steps towards cloud migration. During the pandemic, companies were able to decentralize the workforce and implement work-from-home with the help of cloud technology.
Benefits of using cloud technology in fund management
- Data security: Asset management companies can now leverage on cloud technology provider information security in their business data management. Asset managers would not be so much bothered by data security as that is been handled by other companies whose primary business it is.
- Effective cost management: moving from a large, fixed cost to flexible and variable cost model can be quite beneficial. Pooled data utilities can also break down internal data warehouses.
- Work flexibility: with cloud technology, asset management companies' staff can work from anywhere and anytime.
- Expansion: contracting capacity adds enormous flexibility and leads to expansion
Application Programming Interfaces (APIs)
APIs are software interfaces that enable two applications to interact with each other. These software interfaces are already been adopted in banking industry, and is gaining acceptance by investment management sector to connect with FinTechs and other industry service providers like custodians and fund administrators.
Some of the benefits of APIs includes:
- They help in driving FinTech revolution by making it cheaper and faster to integrate and deploy financial solutions
- APIs make it easy to select the best source of data or content without depending on one third part provider to aggregate it. So fund mangers will not need to build much of their own infrastructure to access expansive sets of industry, data and APIs can help them achieve that.
- APIs implementation helps cut cost and improve efficiency.
Asset management software applications for big data analytics to evaluate fund management risks are beginning to gain adoption by fund management firms.
Effective delivery of fund management services such as equity management, mutual fund management, fixed asset management involve handling of huge data analysis. Manual analysis of voluminous data can be laborious, and the result obtained can be inaccurate and misleading. Big data tools analyse large market data and evaluate risks and opportunities for different assets. Assets analysis premised on huge historic data provides meaningful insights in identifying market trend to determine assets that are looking up as well as those that are nose diving. Good knowledge of market trends helps to spot opportunities with potential profitability and mitigate risk of losses.
Therefore assets management companies need to adopt big data analytics in their decision-making processes.
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Remote Working Technologies
Covid-19 pandemic has brought a new normal — physical social distancing and has accelerated the adoption of technologies in accomplishing work tasks. The technology has made easy for people to work efficiently and effectively from the comfort of their homes as they would do in the offices
According to research by Deloitte, about 92% of investment management companies have either started implementing or are working out the plans to implement technologies that enable the staff to work from anywhere, without necessarily being present in the office. Digital platforms are used for seamless communication and transactions.
Digital interaction will continue to be integral part of conducting businesses especially in driving customer trust, loyalty and market share even after pandemic might have been over. Deloitte's 2022 investment management outlook report says cyber security and customer experience are top priorities for businesses now, and in the future, which was the position of 68% people interviewed in its survey.
Internet of Things (IoT)
Internet of Things (IoT) is a system of interrelated computer, digital or mechanical devices provided with unique identities (UIDs) and capability to transfer data through a network without human-to-human or human-to-computer interactions.
An IoT ecosystem consists of web-enabled smart devices that use embedded systems like processors, sensors, and communication hardware to collect, act on and send data they accessed within their environments. IoT devices share the sensor data they collect by connecting to an IOT gateway or other edge device and data is either sent to the cloud to be analyzed or analyzed locally.
Investment management companies are deploying IoT to operate more efficiently, collect data to have a better understanding of the customers for enhanced customer service delivery, improve decision-making and increase the value of their businesses.
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