How Artificial Intelligence is Managing Investment Portfolios

Daniel Gee, MD at Pello Capital explores…

We’ve come to associate Artificial Intelligence (AI) with cutting-edge technology such as self-driving cars, advanced software or even our smartphones, but over the last few years, it has slowly been introduced into the financial sector to help predict and manage investment portfolios.

It’s certainly exciting to see how much the term ‘Artificial Intelligence’ is now being used within financial services, with specific techniques helping to construct portfolios, improve trading and aid risk management practices. However, despite a lot of buzz about how AI is starting to change the way we invest, the solutions currently being offered by many investment solutions aren’t true artificial intelligence.

Currently, the advanced technology being used to help manage investments and our finances is actually a form of machine learning. This technology has the capability to digestive and analyse vast quantities of data and can quickly offer detailed insights into trends and predictions that certainly have their place in the investment sector. This is slightly different to true AI however which is the ability of a computer or a robot controlled by a computer to perform tasks that require human intelligence and discernment.

Portfolio management is ultimately down to allocating assets to construct a range of investments for a customer, with personalised risk and return characteristics.

AI or machine learning technology can help by providing text and quantitative data analysis, which in turn, leads to innovative investment strategies. As well as this, they can help provide detailed estimates of asset returns and risk estimates to help investment managers.

Asset allocation decisions made using technology alongside experienced brokers can certainly help create portfolios that hit performance targets more closely than those constructed using only traditional methods. As we can see, the technology within the AI space is starting to make a huge impact on the financial services sector – and we really are just at the beginning. As someone who is always looking for the next technological advancement, I am excited to see how real AI is going to be adopted by the financial sector and how it can help us provide our customers with the very best investment strategy.

AI has certainly become a vital tool to help recognise trends and anticipate possible future outcomes of all types of investment. It has the power to calculate behaviours and sort through data faster than humans can, but I firmly believe that the ease and accessibility that tech offers will always work hand in hand with traditional investment advice, rather than replacing it entirely.

Here at Pello, we pride ourselves on challenging the norms of the financial industry by providing a service that is neither entirely focused on technology, nor entirely focused on human advice. We believe even as technology advances and we move closer to offering a true AI solution we will still need the very best talent in the industry to work seamlessly alongside the tech. It remains our goal to support and also teach our customers about their investment so that they’re safe in the knowledge their portfolio is in good hands.