Is Technology a Job Killer in Asset Management?

Is Technology a Job Killer in Asset Management?

Media often cited robo advisors, number crunching softwares, and artificial intelligence as job killers for asset managers. However, some top experts beg to differ.

The theory that technology in the asset management industry is going to be a huge job killer is both inconsistent with economic theory and the evidence, said Eddie Fishman, managing director of The D. E. Shaw Group, who was speaking at the Milken Institute event held in Singapore recently.

«Years of labour theory has predicted that years of job destruction has led to job creation. So we see in the data that asset management employment is at an all time high,» said Fishman, whose firm is involved in global investment and technology development for the industry.

Traditional Barriers Gone

«The amount of capital stock in the form of technology, that complements the human capital in the industry is at an all time high. People are getting more productive every year, they make more money every year, and the amount of technology support they have is greater every year,» said Fishman.

Technology has enabled asset management firms today to recruit talents globally, which they otherwise could not. One example was WorldQuant, which held an international quantitative competition using a web platform.

«The results were astounding. There was a team of three young women in France who ended up winning the competition. They competed for six months, from France, and we had 11,000 entrants,» said Michael DeAddio, president of WorldQuant, who was also speaking at the event.

He went on to explain that one of the women in that team could not get to France physically to finish the last round of competition. Hence, they resorted to using WhatsApp video to work on the problem together, even though they are not physically together.

Extending Human Limitations

Other fund managers are using technology as a way to speed up the investment process and aid in overcoming human limitations and biases. 

«We’re using it (technology) as a leverage point to speed the investment process because the idea of velocity is becoming so critical these days, so we have a number of tools to speed the pace of integration of data into the investment process,» said Taylor O'Malley, president of Balyasny Asset Management.

Significant Shift

It is the risk taking process that O'Malley saw the most significant shift. «One of the biggest limitations for us is those portfolio managers who don’t scale. One of the primary drivers they don’t scale is mental issues : fear of scale, fear of growing too large, fear of volatility.»

When senior fund managers use technology to follow trades made by these portfolio managers, it helped them overcome human fears, O'Malley said. «For us, technology is driving returns and facilitating that. In that same token, technology is driving greater market efficiency. We have quantitative funds using quant tools.»