AI Threatens Mid-Level Asset Managers, Says Queens’ College Cambridge President

Mohamed El-Erian, the president of Queens’ College at Cambridge, believes that generative artificial intelligence (AI) technologies will have a significant impact on asset management, causing both destruction and growth. In an op-ed for the Financial Times, El-Erian describes generative AI as a highly disruptive innovation that is just beginning its journey. Generative AI, a type of machine learning, includes technologies like GPT models developed by OpenAI and Google’s Gemini. These models are used to generate text, audio, images, video, and code. Their application in asset management is still in the experimental phase due to the rapid development of AI and the diverse nature of the field.

Boston Consulting Group identified five key impacts that generative AI could have on asset management in June 2023. These include improved operating efficiency, personalized services on a larger scale, accelerated research, knowledge compounding, and the democratization of code. El-Erian suggests that asset management is unintentionally becoming a testing ground for generative AI technologies. As different firms of all sizes experiment with AI solutions, certain trends will emerge, favoring those who can iterate and adapt the fastest. This could give bigger firms and smaller niche players an advantage, while mid-sized managers and firms lagging in generative AI adoption may struggle to survive.

El-Erian warns that failure to understand and embrace the capabilities of generative AI could be detrimental. Those who fall behind in this regard will find it increasingly difficult to catch up. As generative AI becomes more prevalent in the asset management industry, it is likely to reshape the industry’s structure, leading to consolidation among mid-sized managers or their eventual decline. This could ultimately result in job losses. El-Erian emphasizes the need for asset management professionals to stay informed and proactively adapt to the transformative power of generative AI.