Panel
The Digital Age of Finance: Technology's Impact on Asset Management
Milken InstituteTed Lee, Michael DeAddio, Nobel Gulati, Ian Martin, Sanjay Tikku, Jethro Goodchild, Rajesh Jane, Ritesh Maheshwari
- Technology is expected to revolutionize all industries, including financial services, by enabling the processing of an explosion of data through advances in computing power and AI to manage complex, interconnected, and fragmented markets.
- Building a global business is projected to become significantly cheaper and easier, with entry barriers dropping to approximately $100,000 per location via virtual technology, a cost reduction of several orders of magnitude compared to 10 or 15 years ago.
- Small teams are anticipated to operate large pools of assets across complex classes and geographies using technology to facilitate communication, while State Street plans to provide real-time Net Asset Values (NAVs) and enable same-day settlement (T+0) as blockchain and distributed ledger technologies replace current two or three-day cycles.
- Australia is currently reviewing its chess system with an expectation to deploy blockchain technology within its clearing and settlement infrastructure.
- The industry faces risks including eroded returns for allocators in a zero-sum environment if managers cannot consistently outperform, alongside potential worsening liquidity in the fixed income space due to diminished liquidity points and bank capital constraints before improvement occurs.
- Contrary to concerns of a drying well, the exponential rise in data is expected to generate exponential alpha, with Two Sigma maintaining two million alphas and a goal to trial approximately 1,000 new data sets annually.
- Investors may recoup over 100 basis points currently lost to trading slippage, an opportunity expected to be addressed through improved technology and instrumentation as markets grow more complex and efficient.
- Educational curricula are expected to reform to emphasize technical retraining and the skill of "learning to learn" to prepare graduates for a rapidly evolving economy, while interpersonal skills such as charm are expected to remain non-obsolete.
- Technological adoption is projected to eliminate lower-level functional transaction roles in favor of analytical and problem-solving positions, though State Street expects its workforce to remain around 30,000 as digitization redistributes tasks and efficiency increases.
- Demand for strong client skills is anticipated to persist despite automation, and companies like State Street plan to assist clients in reducing slippage to help them achieve return objectives.