Blending tech into investment

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David Ng, chief operating officer of China-based asset manager CSOP, said his firm is investing in big data and AI to help asset managers generate meaningful insights out of large amount of data in a “dramatically shortened time”.

The technology investment is expected to enhance the firm’s capabilities in data analytics and portfolio optimisation. Ng believes that building up the competence in big data will create unique insights that the firm’s competitors cannot replicate and turn them into competitive advantage.

The firm has already initiated pilot projects and is testing a beta version of its data repository.

The business plan will be executed through in-house development and outsourcing, said Ng. The technology relating to firm’s core activities, such as investment management, will remain within the firm while external service providers would be engaged to automate supporting functions.

Ng did not provide the specific amount of the firm’s budget for technology research and development, nor for the three-year strategy. However, he said the expenditure in this area has doubled year-on-year and the trend would continue until the end of the current plan.

Blockchain

Ng said that a wider use of blockchain technology might relieve asset managers’ reliance on distributors, allowing firms to bypass some constraints put up by external partners.

Blockchain is an encrypted digital ledger of all transactions and related information. This shared ledger is visible by all parties with permission to access.

Ng said that with a blockchain platform, fund distribution can achieve a shorter and secured process of distributing products.

Today’s fund distribution process involves many intermediaries who validate documents, such as the confirmation on ownership and custody, in order to secure the entire process.

“Some of these costs have to pass on to investor, so I do see a big potential in blockchain technology in delivering our products to clients more quickly,” Ng said.

Inertia is the major challenge for innovation in the asset management industry, according to Ng. He observed that there was a tendency for the industry to maintain the existing infrastructure in which they had been investing in the past two decades.

“The ecosystem consists of many stakeholders, banks, distributors and other service providers. They have invested a lot of money into the current infrastructure and that has made them entrenched,” Ng said.

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