AI’s value-add has shifted from speculative to tangible in recent years. For consumers, it’s brought convenience; for businesses, invaluable timesaving. In the asset management space however, its impact is transformative. It can help assess choice, trust, and risk in seconds. AI isn’t just improving efficiency, it’s fundamentally reshaping decision-making processes.
It’s clear artificial intelligence is achieving widespread adoption among asset managers. Linedata’s recent global survey showed that 36% of asset management companies have already integrated AI into their operations. A further 37% are preparing to introduce it.
However, adopting new and evolving technology can prove to be a long-term challenge. Asset managers have to adapt to regulation as it changes. For example, the newly enacted EU AI Act is designed to regulate high-risk uses. It seeks to ensure safety, transparency, and accountability. With new regulations arriving thick and fast, companies should avoid rushing their implementation or cutting corners. Compliance should be their first and last thought.
AI can bring immediate benefits in optimising efficiency, streamlining operations, and boosting decision-making capabilities. The newly enacted EU AI Act will push firms planning to take a more measured approach to deploying artificial intelligence. This will necessitate a long-term, compliance-driven approach.
The New Compliance Landscape
The EU AI Act marks a turning point for AI governance. For the financial sector, the act will put explainability at the fore of AI-augmented decisions. For asset management firms, which increasingly rely on AI to drive decisions related to market forecasts, risk modelling, and portfolio management, the act mandates a robust approach to accountability.
Asset management firms that use AI must now prioritise governance or risk severe penalties and long-term reputational damage. As firms adjust to the EU AI Act, they must recalibrate their AI strategies and implement future-proof frameworks that blend innovation with security and ethical standards.
Hybrid AI Systems: Creativity and Control
One promising approach to the new regulatory environment is hybrid AI. Hybrid systems marry proprietary data with third-party models. With a blended strategy firms retain full oversight over sensitive tasks – such as decision-making models . Meanwhile, outsourcing less critical functions like data analysis or back-office automation to third-party vendors.
However, hybrid systems bring their own challenges under the EU AI Act. The new regulation imposes strict requirements for transparency. This means firms must ensure that any external solutions they adopt meet the same high standards of risk management and documentation. This necessitates a more in-depth vetting process for third-party providers and ongoing oversight to guarantee compliance. Effective governance, therefore, hinges not just on internal processes but also on the integrity and transparency of external systems and partners.
Despite these complexities, hybrid AI presents an opportunity for asset managers to continue innovating without compromising on compliance. By carefully managing these systems, firms can position themselves to harness the full potential of artificial intelligence while mitigating the risks associated with regulatory breaches.
Building a Sustainable AI Strategy
While the EU AI Act certainly raises the bar for compliance, it also presents an opportunity for firms to create more sustainable, future-proof strategies. Much like how the GDPR transformed data governance, the AI Act could drive a more comprehensive approach to artificial intelligence oversight, encouraging firms to adopt stronger ethical frameworks while staying ahead of regulatory shifts.
For asset managers, investing in adaptable AI infrastructures is one way to navigate these regulatory demands. By focusing on systems that are both flexible and scalable, firms can ensure they remain compliant with evolving regulations without sacrificing the pace of innovation. In particular, areas like predictive analytics, ESG reporting, and portfolio management stand to benefit from such advancements, provided firms integrate transparency and accountability into their strategies.
Asset managers who view regulatory challenges as opportunities – rather than obstacles – will emerge as leaders, showcasing a commitment to ethical AI that can ultimately build trust with clients and regulators alike. While the EU AI Act may seem daunting at first, for those who embrace the changes, it offers a chance to redefine how artificial intelligence can shape the future of asset management.
- Artificial Intelligence in FinTech
