More than half of managers (54 per cent) are currently using AI within their investment strategies or asset class research and that enthusiasm continues to grow with 37 per cent planning to use (37 per cent) that technology in the future AI, according to a 2024 Mercer global investment manager survey.

Generative AI (Gen AI), which consultancy EY describes as “the new poster child of AI applications [and] promises to deliver superior performance while executing information search, retrieval and synthesis tasks on unstructured content, along with content generation capabilities”, is among the most likely AI to join asset manager toolboxes.

The Mercer research shows that 26 per cent of asset managers currently use Gen AI while 51 per cent plan to do so in the future.

This comes as no surprise to Oliver Johnson, chief revenue officer at SaaS provider SimCorp, who says Gen AI has multiple functions for the buyside.

“AI in investment management isn’t new; we’ve seen hedge funds using the technology to help them make investment decisions for years. The main difference now is the steps that Gen AI has taken. It ultimately makes that technology more accessible, enhances productivity and supports multiple aspects of asset management.”

Johnson says the buyside is ‘on an AI journey’ starting with what he describes as ‘conversational AI’ moving to incorporating the technology into more complex investment decision making.

“Conversational uses Gen AI to ask questions and improve productivity, but you rely on your users to have some skills in prompting the AI. An example there could be, ‘tell me my exposure by geography or by sector and what are the biggest contributors to my portfolio?’. The answers can help inform decision making.”

Johnson adds that Gen AI is also helping investment managers process the plethora of reports they receive from multiple sources into a consistent digestible format.

“Asset managers get a lot of analyst reports but they’re not very good at storing those in consistent formats. AI gives the ability to pull a research report from various sources, collating the data and providing a report, which makes life more efficient.”

Johnson says more managers are moving to using AI as an assistant where it can perform autonomous tasks.

“An example there is asking AI to create a block trade or transactions or rebalance the portfolio. It’s still human led, but the technology can take a task through multiple workflow steps.”

This is especially useful, Johnson says in private markets, where investors receive capital calls in myriad formats.

“If you’re a big pension fund with 200 private equity fund managers, every single week, they get different call and distribution notices coming into different formats. Machine learning can take that data, even if it’s in a different kind of format, and create a transaction in the platform. Again, it’s an efficiency step,” he says.

More recently, SimCorp has been focused on taking asset managers into the more advanced stage of AI, which Johnson calls an autonomous copilot.

“This is where AI collaborates with the users, it anticipates needs and it’s more proactive than reactive. Rather than asking the AI to rebalance the portfolio, it would detect a cash injection and suggest a simulation of three different ways that you could rebalance your portfolio,” he says

The Mercer survey reports that a quarter of managers report using AI to support investment decision-making, broadening inputs to investment risk-management frameworks (21 per cent), and portfolio construction and rebalancing (18 per cent).

For asset managers concerned such technology looks as if it is becoming a threat to jobs, Johnson argues that humans are still needed to make the ultimate rebalancing decision.

“We strongly believe that technology is not going to replace portfolio managers. Technology is going to make them way more efficient, but it’s still going to be the human at the end that makes the call.”

He continues: “We all thought a few years ago we wanted autonomous driving cars but that hasn’t happened. I think it’s something similar here. I don’t imagine we would ever be in a regulatory or a social place where we don’t want humans making the investment decisions, we just want to help them make better ones.”

The ninth edition of the survey explores the views of more than 2,000 finance leaders and 815 institutional investors around the world on the state of corporate reporting. It assesses the major challenges businesses are facing in financial and nonfinancial reporting, the actions they are taking and the outlook for the coming years.

Among the key findings from the research is an almost universal concern amongst finance leaders that the nonfinancial data produced by their organisations is not fit for purpose to support decision-making – 96 per cent of respondents say they worry about the integrity and reliability of this data, and many have reported problems with data formats (39 per cent) and inconsistencies (35 per cent).

The findings sound further alarms on corporate reporting standards, the firm writes, as they expose fears over the impact that poor data may have on important global goals. Half of those surveyed are seriously worried that organisations will miss vital sustainability targets over the coming years – only 47 per cent of finance leaders and 53 per cent of investors believe that most corporates are on track to achieve stated goals.

The survey shows that the focus by stakeholders on nonfinancial drivers of value is intensifying, with more than two-thirds of finance leaders (69 per cent) saying that they have noticed investors asking more questions about these issues than they did two years ago.

Many of those surveyed (55 per cent) harbor fears that allegations of greenwashing could be levelled against companies in their various industries, highlighting underlying doubts that nonfinancial disclosures are backed up by the necessary due diligence, data and processes.

Investors are hopeful that new reporting standards could help businesses’ efforts to improve sustainability disclosures – 78 per cent of respondents say they think new regulations could have a positive impact. However, finance leaders seem to have worries: more than half (55 per cent) say they expect costs to be burdensome, and two-fifths (44 per cent) believe that meeting the new rules would be highly complex.

Myles Corson, EY Global and Americas Strategy and Markets Leader, Financial Accounting Advisory Services, says: “These are tumultuous times for all business leaders and finance chiefs are no exception. The task of guiding an organisation through short-term volatility while keeping a firm hand on long-term growth relies in no small part on the finance function’s effective use of data to paint a clear picture of future plans and prospects. But it’s clear there are major worries among CFOs and the investor community around data transparency and nonfinancial information, which they cannot afford to ignore.”

Nicolas Lecoq, EY Global Financial Accounting Advisory Services Leader, says: “Finance leaders’ apprehension around businesses’ ability to meet crucial goals underscores the growing importance of building confidence in reporting on sustainability efforts. Customers, shareholders, regulators and investors increasingly hold companies to account for their environmental impact and commitment to sustainable practices. This means that the integrity of corporate reporting is now more critical than ever – it reflects an organization’s dedication to sustainability goals and can directly impact the trust that investors, and the wider public, are willing to invest in it.”

Hopes are high, however, that technology could provide urgently needed answers, the firm says. More than half of investors (57 per cent) believe that AI could prove very useful as a tool to assess the credibility and accuracy of financial and nonfinancial disclosures, while 52 per cent think it could be used to assess alternative data, and 51 per cent believe it could help to spot discrepancies in company disclosures.

Two-fifths of finance leader respondents (43 per cent) say they are enthusiastic about using AI in corporate reporting, however, more than one-quarter (29 per cent) say they are holding out until the risks of the technology are better understood; 39 per cent are apprehensive about the likely costs; and 36 per cent are worries about ensuring they comply with all the relevant rules and regulations relating to AI. Only one-third (32 per cent) say they already have high-grade technology in place for managing and analysing data.

Corson says: “While no one can pretend there’s an easy path ahead, there are certainly ways in which organisations can successfully navigate the challenges. Finance leaders who focus on creating sustained value and build confidence in reporting and harnessing technology to enrich data analytics can rest assured that they are heading in the right direction.”

Lecoq says: “Although AI is still in the early stages of adoption, and while it’s clear that many finance leaders are nervous about potential costs, compliance and wider possible risks, there’s no doubting its immense potential to transform data analytics and corporate reporting for the benefit of all.”

The survey, which gathered insights from over 100 senior decision-makers at banks, wealth and asset managers, insurers, and financial sponsors, highlighted the importance of AI with 81 per cent of financial institutions stating they view it as a business opportunity, a significant rise from 56 per cent in 2023.

The report shows that nearly half (46 per cent) of financial institutions have established dedicated teams to explore AI use cases, while two-fifths (39 per cent) have partnered with firms possessing AI capabilities. Additionally, 15 per cent have already collaborated with firms specialising in AI.

When examining the opportunities AI provides financial institutions and whether benefits are already being felt, three key areas emerged from the survey. These were:

Improved productivity: 62 per cent see it as an opportunity while 32 per cent are already seeing the benefit

Competitive advantage: 61 per cent see it as an opportunity while 22 per cent are already seeing the benefit

Greater insight on customers: 69 per cent see it as an opportunity while 18 per cent are already seeing the benefit

For other priorities, such as driving business growth and enhancing client experience, many respondents have yet to see significant benefits. However, over two-thirds (69 per cent) of institutions expressed confidence in their ability to implement AI and capitalise on its potential.

Lisa Francis, Head of Institutional Coverage, Lloyds Bank Corporate & Institutional Banking, says: “This year’s survey highlights a significant boost in AI investment among UK financial institutions, reflecting its elevation to a board-level priority. The focus has shifted from merely exploring AI to making practical investments and applications. As a result, many institutions are already experiencing the benefits, such as enhanced productivity, deeper customer insights, and a stronger competitive edge. While the full impact across all business areas is yet to be realised, this will evolve as institutions continue to innovate, test and learn.”

Rohit Dhawan, Director of AI and Advanced Analytics at Lloyds Banking Group, says: “Artificial intelligence is rapidly reshaping the financial landscape, and what we’re seeing is just the beginning. Growing investments from financial institutions and increasing partnerships in AI demonstrate a clear commitment to leveraging this technology. From automating complex processes to unlocking insights that improve decision-making, AI is enabling institutions to reimagine what’s possible. We are witnessing an exciting period of transformation, and it’s inspiring to consider the advancements that lie ahead for the sector.”