Trading with AI in finance has recently increased – but it’s not a new concept for investment banks. Not by far. Hedge fund and asset management companies are using cutting-edge, intuitive systems to carry out fast and efficient trade decisions more and more every day. Because technological advances are overriding the traditional human processes that portfolio managers are accustomed to, there is a new version of electronic asset management on the horizon. But – like the ‘robo-advisor’ software programmes – to what degree is human intervention still required?
Progress from past to present
The reason why AI in finance seems so organic is because its financial roots can be traced back to the stock exchange. Here, buyers and sellers were matched using technology and, since then, banks have developed automated trading strategies too. There is the opportunity to concentrate on automated processes, but because the market is quite complex, it can take time for businesses to assimilate AI into their business culture.
One of the main problematics associated with AI is how the financial markets are constantly changing. Therefore, using AI in finance and investment management may not only be complicated, it could also produce outdated results. As machines will be relied upon for their accuracy, they will need to be monitored and optimised by AI experts, working to the latest algorithms. If this is the case, there are worries that investing in AI could be more of a cost, rather than a saving. Whereas investment companies who employ engineering experts will have a clear advantage over companies with limited expertise in the field of AI.
With an increasing interest in AI, a knowledge base will organically grow as time goes on. Therefore, it makes sense if investment firms are amenable to change. When you’re competing in the modern financial marketplace, it pays to use innovative techniques.
AI and its benefits
The rise of machines is matched by the increased level of investment in algorithmic tools, which can complete trades based on pre-existing criteria. So, what are the added benefits, you may ask?
- Saving on core business costs and market impact
- Managing relationships with brokers
- Evaluating trading tools and machine-learning techniques
- Completing low-value tasks and improving overall efficiency
- Generating data-driven insights for clients’ assets
- Matching deals to investors
Generally, businesses view technology as a platform to compete with rivals in the industry – after all, AI will always be in vogue. Like the blockchain-cryptocurrency trend, as discussed in our exclusive Q&A with Airfoil Capital’s Zach Hamilton, AI is popular amongst industry heads and is a hot topic at the latest financial conference. It is also welcomed by fast-paced firms seeking real-time results.
The emphasis on intelligence poses the question of how AI in finance can better impact the trading landscape. As well as making decisions, the next AI update on the cards is to manage the investments. That’s right – investments could be driven with AI behind the wheel.