From the AI-human hybrid portfolio to giving fund managers gentle 'prompts' on their behavioural biases, Mike Sheen looks at how Allianz Global Investors has embraced artificial intelligence and what the technology means for the future of asset management
Artificial intelligence (AI) is gradually transforming every industry it touches.
While asset managers are often keen to capture the opportunities AI offers within their portfolios, they have been relatively slow to adapt the technological revolution within their own businesses.
Quantitative and algorithmic strategies, as well as 'black box' technologies, will be familiar concepts to those in the financial sector.
However, Allianz Global Investors is pursuing a philosophy that keeps the human as an essential element of portfolio management, supported by data models and trend identifiers.
"Artificial intelligence is no longer science fiction," says Thorsten Heymann, global head of strategy at Allianz GI, speaking at the company's HQ in Frankfurt. "But it is fair to say that, in the asset management industry at least, it is still more of a concept than a reality.
"At AllianzGI, we believe in the correct and smart combination of the human and the machine.
"The human moving forward without the machine is like the dinosaur - they died out. However, there are a couple of things the machines cannot do without humans."
Global CIO equity, Steve Berexa agrees, explaining AI is "essentially just very advanced pattern recognition".
He says: "There is so much value-add in investing that comes from human imaginations and humans' abilities to see things that the computer can't see, and will be unlikely to see for the foreseeable future. A marriage between humans and machines is the vision."
As is the case for all industries taking on AI capabilities, for Berexa and his colleagues in equity investment the incorporation of AI has been disruptive.
Portfolio managers and analysts who have done their job for years - sometimes decades - without the aid of this technology are understandably anxious about what it means for their professional futures.
He says: "It is stressful, particularly for the likes of the veteran teams and analysts who wonder what it all means - I have had a couple of instances where people are worried about what it means for their jobs in the future."
However, he explains employees have no need to worry as the firm has no plans "to mess around at all with black boxes".
"There is clearly a role for the human here," he adds.
He likened human involvement at the firm in the current climate to when then the spreadsheet was invented, which also caused a lot of disruption but "actually created more jobs".
Soon portfolio managers (PMs) at the firm will have a closer relationship with machines as trials begin with a third-party provider to build an AI application that will present them with automated notifications when the technology identifies an issue with behavioural bias.
Berexa explains: "It will prompt the PM - not pepper them constantly through the day.
"It is going to 'say, hey, it looks like you're doing it again'. AI probably has a lot more potential to bug people than replace them.