With the proliferation of AI tools on the market, it seems unusual for a major asset manager to invest in developing its own.
But unsatisfied with what was on the market, JP Morgan Asset Management decided to take the risk with in-house development, which CEO George Gatch said it gives the US$2.4 trillion ($3.66 trillion) asset manager a competitive edge in the marketplace.
“We did a deep analysis of tools that are available in the industry, and we came to the conclusion that none of them satisfied the needs of our portfolio managers and research analysts,” Gatch told Professional Planner, Investment Magazine‘s sister publication last week during the asset manager’s media conference in London.
“JP Morgan Chase and Company invest over $15 billion a year in technology. That advantage that creates for the asset management business in terms of cyber, proprietary ecosystems for generative AI, and we can reach in and use those tools with the 1500 engineers that we have dedicated in asset management. No other asset management firm has that advantage.”
Gatch said many of their competitors made the decision to outsource their portfolio and risk analytic capabilities, while they made the decision to build proprietary capabilities.
“[They] are tailored specifically to our investment processes and capabilities – I believe that gives us an edge,” Gatch said.
Spectrum, the firm’s portfolio management tool is used by the group’s research analysts and portfolio management teams.
“We’re using AI, big data, 40 years of history that we have on earnings and research on companies around the world, combined with data that we buy from the street,” Gatch said.
“We’re using big data and AI ways of providing that research to portfolio management teams and we’re using some cool generative AI capabilities there as well, Spectrum GPT, which simply allows an analyst to hit a button, summarise research either from an internal analyst or from external data that we buy, so that in a click of a button you can do what took hours now takes seconds.”
In the portfolio management system, it uses optimisation tools that allow a portfolio manager to optimise portfolios with a click of a button.
“It has provided additional capacity of productivity of more than 20 per cent,” Gatch said.
“In our trading, we’ve investing heavily in our buyside trading capability. What that is allowing us to do is through automation, our trading volumes have increased.”
JPMAM isn’t alone in its approach to internally investing in AI; US investment firm Bridgewater developed its own AI system, AIA (pronounced eye-a).
“What I’m trying to do in my business is get an AI that learns and create that loop – it can learn, generate revenue and then learn again and get better,” Bridgewater co-CIO Greg Jensen said at the Top1000 Funds.com Fiduciary Investors Symposium in Singapore last week.
“If you have a self-improving artificial intelligence, it of course creates a flywheel like nothing that’s ever happened before, so there is at least some chance.”
Gatch said the asset manager’s trading volume has increased 17 per cent over the last two years, while trading costs are down 11 per cent.
“These are fairly dramatic impacts effectiveness, productivity and cost for investors,” Gatch said.
While the technology largely doesn’t have direct impacts for advisers, when it comes maintain independent distribution relationships, Gatch said access to education and information will be a key differentiator.
“One of the things that distinguishes JP Morgan Asset Management is our approach to providing advice and guidance and insights to investors around the world,” Gatch said.
“Long term capital market assumptions, we’ve been doing over 30 years as a tool to help financial advisers and institutions manage their asset allocation. Our market insights and guide to the markets programs is available in 25 countries.”
Gatch said this information doesn’t include product sells, but are instead designed to help investors “make sense of what is happening and take the emotion out of investing”.
“Hundreds of thousands of advisers around the world rely on this as a way to communicate objective facts to end clients,” Gatch said.
Editor’s note: The author attended the JP Morgan Asset Management International Media Summit as a guest of the company.
