Asset managers that underestimate the importance of artificial intelligence to their businesses do so at their own peril, according to Anton Eser, global chief investment officer of Robeco, who thinks that many have less than a year to get across the “most important transformation” the industry has seen the beginnings of the index business more than 25 years ago.

“It’s early days but moving incredibly fast, and the reality is that in our industry, the next 6-12 months will really determine who the winners and losers are. In every industry, actually,” Eser told the Investment Magazine CIO Series podcast.

Asset management firms have to make AI a “strategic focus”, Eser said, ensuring that they have the right combination of internal systems and policies and the flexibility to utilise the “incredible tools” that are already out there.

“If you have everyone using their own tools and doing their own thing, you don’t build your own internal intelligence effectively,” Eser said. “The power of AI is the collective intelligence you’re able to build. It brings teams together because you’re able to share information easily. An analyst sitting in Shanghai has a meeting with a local company and they’re able to put that in our AI hub that’s available right across the platform. That’s just research, but our whole workflow is being transformed.

“[It can’t just be] a productivity gain that you get from being able to automate research reports. The winners are the ones who transform their business models and workflows and understand how the roles of analysts and portfolio managers will evolve through that combination of human and machine. That’s the future of our industry.”

And as markets become increasingly complex and, in some places, chaotic, asset managers will need to use any edge they can get. 

“We’re really guilty in financial markets, and as humans, of extrapolating everything from what we’ve experienced, and we’ve experienced for multiple decades, but particularly in the last 15-20 years, is just the most incredible rally in US equities. [Diversification] completely hurt you. The trade was to own passive beta, and everything relative to that underperformed.

“Why take risk? Why take active risk? Why take manager risk, or geographic risk? All these things were gradually beaten up. That’s the reality of the past, but it’s not the reality of the future. We’re seen emerging markets outperform, we’re seeing dispersion within US equities, and there will be winners and losers in this cycle, particularly related to AI.”

Eser thinks that emerging market outperformance can be sustained, noting that previous rallies – including in the 80s, and following the popping of the dot com bubble – ran for close to a decade, as well as the fact that emerging markets are still trading at a discount to developed markets despite the rally in South Korea and Taiwan.

“The final and most important thing is, where are the consumers of the future? You look at the technology and you look at the makeup of EM; 15-20 years it was very much an energy and materials play, and now it’s a tech and consumer play,” Eser said.

“It’s come a long way, particularly South Korea and Taiwan, by virtue of them being massive beneficiaries of AI – just due to the hardware – and over the long-term, we very much believe that emerging market biases within portfolios is the right way to go.”