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How to drive effective AI adoption in investment management firms

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How to drive effective AI adoption in investment management firms 1

By Chandini Jain, CEO of Auquan

Artificial intelligence (AI) has the potential to augment the work of investment management firms to unprecedented levels, powering decision-making, driving efficiencies, and ultimately improving performance. In fact, the market for AI in asset management is expected to grow to an astounding US$13.43 billion by 2027, expanding at a CAGR of 37.1% between 2020 and 2027. Innovative firms are applying AI across the industry value chain and transforming the ways in which they use the ever-expanding amounts of data that are available to them.

However, that’s not to say that there aren’t challenges and obstacles involved in leveraging the technology. AI adoption is not a ‘magic bullet’ that can solve inefficiencies without the right set-up, nor should it be treated as a simple ‘add-on’ that portfolio managers (PMs) can tap into when they see fit. AI implementation in an investment management firm requires a number of prerequisites in order to have maximum impact. But first, let’s take a look at exactly how AI can boost the performance of investment management firms.

How AI adds value

Implementing data analytics into the investment management value chain holds a number of benefits. For example, when it comes to front office operations, AI can supplement investment decisions by drawing insights from alternative sources of data such as satellite imagery or social media, while also automating the analysis of large datasets. Data science teams working within investment management can build simulations to allow PMs to predict the performance of new investment ideas. They can also use AI for trading – to optimize trade execution and automate trading decisions.

One example of using AI to power alpha generation comes from Man Group, which saw a five times increase in assets between 2014 and 2018, and whose funds that incorporate AI total more than US$12 billion. Front office operations are arguably the business area where AI holds the most potential.

When it comes to distribution and marketing, AI can improve prospect and sales targeting using segmentation, predict and reduce attrition, support personalization, and help develop pricing algorithms. Data analytics can also be implemented into the areas of operations, tech, and support to automate processes, improve talent targeting, predict team member performance, and strengthen compliance, amongst other uses.

Going beyond simply reducing costs and driving efficiencies, AI is providing new opportunities for investment management firms to transform how they use data to operate and inform decisions. But despite all of this, adoption levels are still relatively low: A 2019 survey by the CFA Institute found that only 10% of PMs responding had used machine learning (ML) techniques during the year prior. Furthermore, a 2019 report by BCG found that less than 30% of asset management firms are actively leveraging data analytics. Evidently, launching an AI project is not an overnight process – nor is it one that guarantees success without the right prerequisites in place.

Here’s how investment management firms can set themselves up for success and ensure readiness for AI implementation.

Embed a data culture 

Before steaming ahead with any AI project, investment management firms need to ensure that the entire organization appreciates the value of data-driven decision making. A firm may have already hired a data science team or gained access to alternative data sets, but if it doesn’t have a culture of systematic decision making that permeates across the organization, the success of any AI project will be limited.

How can firms ensure that this is the case?

Ultimately, building data-driven must start at the top: the CEO, CIO, and all other executives must lead by example and evidence of their own commitment to data-based decisions. If leaders want their teams to leverage data at all points of decision-making, they must make the data accessible for non-technical employees and provide training on how to use any relevant tools. Teams must feel comfortable with the why of data analytics solutions, so management must make them explainable while ensuring they are aware of the capabilities and limitations of AI. And finally, the data science team must avoid working in a silo, away from the other business functions of the firm.

Reconfigure the team structure

The core investment process must be re-thought, from the ground up. Data science teams must be driven by a business need which is provided by the PM, and then the two must work together to co-develop the right solution.

In addition to having a centralized data science team, the firm should have decentralized data scientists that sit within the business unit. The central team should focus primarily on data acquisition, cleaning, and ensuring reliability. The rest of the work should be done by data scientists on the PMs team – this will ensure the work is in-line with the business needs and will actually be used by the PM. With the clean, reliable data coming from the data acquisition team, the data scientists can rapidly prototype ideas for the PM.

Invest in the right software

Too many investment management firms attempt to build all of their AI software in-house. While the software that’s required for core operations and stems from core finance expertise should be developed internally, this does not apply to all other solutions being used.

For example, data analysis and automation tools that leverage ML domains such as language processing, big data processing, or image processing should not be built in-house. Constructing these systems internally is expensive, time-consuming, and means hiring for skills that would otherwise not be required within the firm. Not to mention, such systems would need a large and active development force to continuously maintain them.

That’s why it’s advisable for firms to find a third-party vendor who can take care of building the feature set that’s required, update the software with its latest version, and scale according to needs. This vendor will also take measures to ensure that the firm’s standards are consistent with its peers, and importantly, keep the system stable and secure. By integrating with a third party vendor, data science teams can focus on the core business objectives and maximize the use of overall resources.

While AI offers countless opportunities for investment management firms to augment and power decision-making and is already setting apart the top-performing firms from those that lag behind in adoption. With so much potential to enhance portfolio performance, AI adoption should be viewed as non-negotiable for forward-looking and innovative firms. It is paramount, however, that these firms embed a data-driven approach across all teams – not just PMs – and provide the structures and tools necessary for results to flourish.

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Hisham Itani and Resource Group Recognized in the 2020 Global Banking & Finance Awards®

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Hisham Itani and Resource Group Recognized in the 2020 Global Banking & Finance Awards® 2

Global Banking & Finance Review has awarded Hisham Itani the Chairman and CEO of Resource Group, Technology CEO of the Year Middle East 2020 in recognition of his vision, strategy and strong leadership that have contributed greatly to Resource Group’s success in winning the Most Innovative Holding Group Middle East 2020 in this Global Banking & Finance Awards®.

 

Resource Group is an investment group with a portfolio of diversified businesses that capitalizes on technology and human talent for value creation. The company has proven that it has gone the extra mile to develop innovative solutions aimed at improving people’s lives and helping Lebanon transition toward a knowledge-based economy. Global Banking and Financial Review, the renowned online and print magazine identified a number of areas that Resource Group has excelled. The company has been awarded Most Innovative Holding Group Middle East 2020, and Hisham Itani the Chairman and CEO, receives the award for Technology CEO of the Year Middle East 2020. Under his leadership, Resource Group has grown from a family security-printing business to a diversified international investment group, with a portfolio of companies across 10 sectors in over 75 countries.

Wanda Rich, editor Global Banking & Finance, said “Mr. Itani took the security printing business to another level and expanded into different technology verticals in an impressive list of success stories”. The list includes digital security, smartcard manufacturing, mobile value added solutions, cyber security and secure communication solutions, telecom infrastructure and managed services, elections supply chain services, lottery systems and operations, mobile and virtual reality games, among others.

Resource Group’s focus on technology has had a constructive and tangible impact on government automation and on citizen experience in target markets.

Editor Wanda Rich says “We are proud to offer Resource Group these prestigious awards and wish them continued success and growth into 2021 during these challenging economic times”.

Global Banking and Finance Review is a renowned online and print magazine. The magazine’s website alone receives over 7 million page views annually. Global Banking and Finance Review provides a balanced view with formative and independent news from the financial community. The Global Banking & Finance Awards® were created to recognize companies of all sizes that are prominent in particular areas of expertise and excellence within the global financial community. The awards are known throughout the global banking and financial community. They reflect the innovation, achievement, strategy, progressive and inspirational changes taking place within the financial sector.

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Bouncing back in 2021: Digital Transformation is no longer a choice as dependence on 5G, IoT and Data increases in society and business

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5G and Open Banking: Explosive growth or business as usual?

By Ivan Ericsson, Head of Quality Management, Expleo Group Limited

The global pandemic has put enormous strain on businesses and brought into sharp focus the importance of being agile, adaptable and able to increase the pace of innovation and change at short notice – catapulting technology right to the top of the agenda for many organisations.

As the economy works to get back on its feet, technology is only going to play a bigger role in our lives. At Expleo, as experts in digital transformation and the reliable implementation of technological innovations, we’ve outlined the biggest tech-driven trends that we expect to see in 2021 and beyond.

1)     “Digital transformation” no longer a choice

If the COVID-19 pandemic has taught businesses anything, it’s that they need to be poised to respond to abrupt market disruption at any moment, making digital transformation mandatory overnight.

With no room for delay, hugely complex corporations – that have historically been slow to adopt technology – have had to accelerate their reliance on technology just to keep afloat in recent months. Digital change, at speed, has become the norm.

Even last year, the idea of an unscheduled video conference call might put people on edge – now most of us wouldn’t think twice about calling a colleague over Teams or Zoom even for a 2-minute conversation. At the same time, social infrastructure has moved with the needs of its users, with telecoms giants strengthening and opening up networks so we can keep communicating despite social distancing.

There are now very few excuses left for operating in a non-digital way. All businesses need to be intelligent businesses that can change direction nimbly, with speed, confidence and composure. As we see more businesses putting this into practice, it’ll likely result in an increased number embracing and normalising some of the behaviours of tech-savvy giants like Apple and Amazon, who have no doubt thrived during this period.

Their success can largely be attributed to normalising an agile approach. By ensuring all applications have testing facilities built in – a “quality shadow” if you will – it allows for continuous improvements, and the ability to change direction quickly and confidently, when needed. This is particularly valuable today as the world becomes more fast-paced and increasingly unpredictable.

2)     Big data/AI/predictive analytics

We’re moving into a space where big data can be extracted from the most seemingly innocuous places. In a hyper-connected world, a move as simple as a dog walk could offer huge swathes of data to the right companies. Many businesses already realise the benefits of capturing and utilising big data, but not all have taken advantage of it. The businesses that move quickest are most likely to reap the rewards in a more impactful way than their ‘data shy’ competitors. Where data used to be a side effect of business operation, it is now the driving force.

As businesses begin to rely more heavily on data to make critical decisions, independent assurance becomes increasingly important to get those decisions right. Forward-thinking, data-driven organisations must therefore assure that the data is correct in the first place, to avoid giving businesses false confidence and risk them moving in the wrong direction – something that is rarely affordable in today’s competitive and fast-paced environment. If businesses are not 100% confident in assuring the quality and accuracy of their own data, they should look to a third party for support.

A key data trend we expect to see moving further into 2021 is the increased use of predictive analytics. At the moment, businesses will often use data analytics to give us insights into our past activities, or to tell us where we are right now. However, the real value lies in knowing where we are going and how we are going to get there. Data analytics will help to identify the optional levels that can be pulled to drive change and realise business benefit.

Secondly, as intuitive technology advances and becomes more accessible, we expect over the next 12 months to see companies of all sizes begin to adopt artificial intelligence (AI) to drive intelligent analytics. In this context, AI refers to various technologies that allow machines to learn, sifting through ‘messy’ big data in order to find and unlock valuable predictive insights into future events. This allows businesses to better adapt their strategy to likely future outcomes and get a head start in the market.

However, with this ever-increasing emphasis on data and data protection, ethical AI will have a more prominent role to play in 2021 and beyond. Protected, usable Data is a by-product of good data security and privacy measures; however, the public remain wary of how their data is being used, particularly after the fallout from Cambridge Analytica’s use of data to influence an election[1]. Businesses, therefore, must give their customers confidence that their data is secure and protected.

3)     Moral relevance/corporate altruism

Research shows that young people are increasingly researching and considering the ethics of brands they’re purchasing from. And it won’t be long before this attitude starts seeping into every other aspect of their lives, with more and more people wanting to work for what they consider to be “purpose-driven” businesses.

Talent is the lifeblood of any company, so for big corporations, many of whom were born to create profit, this could put them in a tricky position. They might already be influencing society in a positive way – but this is unlikely to have ever been their main goal.

Moving forward, however, all organisations will have to start thinking about the “Triple Bottom Line”. That means considering the environmental and social impact of your business, alongside your commercial imperative.

We’ll soon see a mindset switch across businesses, from ‘competing’ to ‘advancing’. Instead of wanting to be the “best,” the question will be, how can I better serve the world around me?

In line with this, businesses will have to start thinking more about how to use tech for good, as we’ve seen with the likes of Microsoft Teams connecting tens of millions of people every day, during this very dark time[2].

2021 is likely to bring even more inroads when it comes to using technology to improve society, whether it’s developing bespoke problem-solving technologies or using IT to ‘eco-proof’ existing sectors, the goal for businesses is to rise to this challenge and build a better future for people and the planet through the use of technology. But all organisations will continue to need to be able to justify technology use and prove that they’re using it ethically, and in a secure manner.

4)     5G new networks – just about all big trends are driven by/reliant upon faster networks – particularly relevant for a more distributed workforce

Greater access and utilisation of 5G networks across the country will underpin and accelerate all of the key trends discussed. Everything we do on our smart devices we can expect to do at higher speed, greater capacity and with lower lag times.

As our digital footprints extend beyond simple web browsing and into our daily lives through smart technology, we are creating huge amounts of data every minute. This vast flow of data is increasingly dependent on new high bandwidth networks to facilitate it. Therefore, the merging of technology and engineering will become critical in ensuring big data is carried successfully to drive analytics and drive business.

The fact we have managed to successfully work from home during COVID is a glowing recommendation for the quality of the networks as they exist today, and they will only get better.

The telecoms industry is already working overtime to ensure that people all over the country get reliable access to the internet – and the fact that there is still inequality in this area proves just how challenging this is. But, in line with this trend toward hyper automation, which will make data extraction and analysis a part of everyday life for businesses, the consolidation of tech and engineering will be ever more important.

Forward-thinking companies will look to incorporate 5G networks into their business strategy. This could be from an internal perspective to enhance the abilities of their remote workforce. Alternatively, this could relate to their own products or offerings – developing an internet of things (IoT) strategy, improve user experience, or bring products to market faster by analysing big data and adapting quicker. Either way, with increasingly improved networks, businesses are expected to take advantage of the huge increase in accessible and usable data.

Concluding comments:

For businesses to truly reap the benefits of these new technologies, they must be developed and adopted in the right way.

Quality assurance, trust and security are three key requirements that the technology of the future depends on to succeed. Having these requirements at the heart of any digital transformation will ensure that systems perform reliably, having been tested and assured.

By prioritising a seamless customer experience combined with an ability to create, test, and scale digital solutions and operationalise at pace, businesses will be in the best possible position to take advantage of the potential being unlocked by these new technologies.

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Ahli Bank, Oman, is SunTec’s 50th customer for its Indirect Taxation Solution

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Ahli Bank, Oman, is SunTec’s 50th customer for its Indirect Taxation Solution 3

SunTec’s GCC VAT compliance solution to help Ahli Bank automate end-to-end VAT compliance process, manage regulatory changes, and seamlessly integrate it with the existing IT ecosystem

SunTec, the world’s #1 relationship-based pricing and billing company and the provider of #1 GST and VAT compliance solution for Banks and Financial Services in GCC and India, has partnered with Ahli Bank, Oman, to provide its GCC VAT compliance solution.

The win is a landmark one for SunTec as it marks the 50th customer for its indirect taxation solution. SunTec has garnered 24 customers in India and this is the 26th customer in the Middle East to acquire the solution.

VAT is likely to be introduced in Oman in early 2021 and Ahli Bank has taken the proactive step of adopting a VAT compliance solution to ensure operational efficiency, enhance revenue, and augment customer experience.

Amit Dua, President – Client Facing Groups, SunTec, said, “We are delighted to partner with Ahli Bank, Oman in what marks a historic win, in their journey to ensure VAT compliance. We understand that the VAT landscape is evolving within the GCC, and therefore, our solution offers agility to respond to these changing regulatory requirements. With the Xelerate platform and GCC VAT compliance solution, Ahli Bank can digitize the entire VAT compliance process and comply with least number of changes to their existing technology infrastructure.”

He added, “VAT is a crucial step that the GCC countries have taken to implement tax regimes. It is imperative for banks and financial institutions to have a robust and scalable solution to accommodate their specific needs. Ahli Bank joins the list of more than 20 banks who have adopted our GCC VAT Compliance solution.  I’m proud to say that approximately 3 billion transactions per annum are processed through our GCC VAT/ GST compliance solution across our client base.”

Said Abdullah Al Hatmi, CEO at Ahli Bank, added: “It is extremely crucial for us to be ready for VAT compliance. We are very happy to partner with SunTec to deploy GCC VAT compliance solution. With SunTec we will have a single solution in place covering all aspects of VAT compliance and we will be future-proofed given that any future regulatory changes will be handled by the solution with ease.”

SunTec’s GCC VAT compliance solution based on the Xelerate platform will enable the bank to smoothly comply with GCC VAT regulations and manage potential regulatory changes with ease. The single end-to-end solution helps automate the entire VAT compliance process including centralized rule-based tax determination, input tax recovery, tax invoice, reconciliation, corrections, adjustments, statements, and regulatory reporting.

SunTec GCC VAT Compliance solution is architected to meet the unique needs of banks and financial services firms and can easily integrate with existing IT systems. The solution is designed to process all taxable transactions across business lines and applications, reduce cost of compliance, mitigate potential risk of compliance violations, penalties, and reputational risk.

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