President of Queens’ College Cambridge warns AI could wipe out mid-level asset managers

AI tools such as ChatGPT and Gemini have the potential to be both a destructive and lucrative force in the field of asset management.

Generative artificial intelligence (AI) technologies will have a transformative impact on the field of asset management, leaving both destruction and growth in their wake, according to the the president of Queens’ College at Cambridge, Mohamed El-Erian.

In a recent op-ed published in the Financial Times, El-Erian writes that generative AI is “a massively disruptive innovation” that is “just getting started.”

Generative artificial intelligence

Generative AI is a class of machine learning that includes GPT technologies, such as OpenAI’s ChatGPT and Google’s Gemini. Typically, these models and services are used for the purpose of generating text, audio, images, video and code.

Its use in the world of asset management remains largely experimental. This is due in part to the rapid pace of development in the AI sector and, also, to the wide-ranging and diverse nature of asset management.

In June 2023 Boston Consulting Group identified five key impacts that generative AI could provide for the field of asset management: improved operating efficiency, personalization at scale, knowledge compounding, research acceleration and the democratization of code.

Asset management

El-Erian writes that the field of asset management “increasingly finds itself, albeit unwittingly, serving as a natural experiment” for generative AI technologies.

As asset management firms of various sizes trial different AI solutions to find out which work for them, trends will begin to emerge, and those with the ability to iterate and move the fastest will likely gain an edge.

Per El-Erian, this could spell bad news for those stuck in the middle:

“Put together, this dynamic will further push the industry trends towards a structure of a handful of very big firms and a larger number of much smaller niche players. Mid-sized managers, those with $100bn to $500bn of assets under management, and the Gen AI-lagging firms will be pressured to consolidate or simply atrophy. This is where the job destruction occurs.”

The Queens’ College president also issued a stiff warning that those who lag behind in their understanding of the capabilities of generative AI will find it “increasingly hard to catch up.”

Related: Microsoft to invest 3 billion euros into AI development in Germany