The FT article that’s all about Butterwire
Robin Wigglesworth’s latest article on quantamental investing builds on comments from a top hedge fund manager and JPM’s Chief Data Scientist to illustrate where the future of asset management may lie. It describes how machines are being developed to improve portfolio managers rather than replace them, and how they seek to marry different investing perspectives (e.g. quantitative and fundamental), seemingly in a bid for human managers to keep ahead of autonomous machines.
While the article could have just as well been describing butterwire’s journey since the global financial crisis, its conclusion does trivialise the issue of Augmented Intelligence as a man vs. machine stand-off (high skill + high uncertainty + long time horizon jobs will be the last to be replaced; think surgeons, diplomats... and active fund managers), and misses the bigger picture aptly captured in two recent McKinsey reports, wherey:
The industry trend toward “bigger takes all” is fast accelerating and putting untold pressure on mid-sized active managers. Last year, 90% of the largest US-based asset managers (with over $1 Tn Assets Under Management) enjoyed positive asset flows vs. 55% for the rest. Meanwhile, the industry’s “non-productive” cost base (mid and back office) keep inflating at 6% per annum, twice that of “productive” ones (investment management). Size, not performance, is the ultimate source of asset growth and profitability.
The industry is blessed with vast untapped sources of productivity gains that modern technology, and some cultural evolution, can rapidly unleash and that agile mid-sized managers can capitalise on. Indeed, asset managers who invest most in building digital capabilities, in breaking the siloes between investment, technology and operations, in both reducing legacy costs and enhancing investment performance and customer experience, are already enjoying much superior asset growth and profitability.
These studies capture the essence of what the value proposition of Butterwire’s AI equity analyst is about: immediate productivity impact in terms of time-saving, extra edge, and improved collaboration across front-office functions, with a “stock” (ie. standard spec) engine that is ready to be modified and tuned to any active manager’s team, investment style, and portfolio mandate by our “quantamental” team, cost-efficiently.