Artificial intelligence – Cover story


that he sees AI within a wider technology development. “Digi- tal transformation is the hottest topic when speaking with business leaders in any industry, and this is no different with pensions,” he says. And Mason adds that there is a need to not only adapt to change, but the challenges connected to it. “There is no doubt that the ‘art of the possible’ is expanding rapidly with techno- logical advances and no one can afford to sit still,” he says. “Dramatic headlines about AI and the roller-coaster ride surrounding bitcoin and non-fungible tokens make it diffi- cult to make sense of how to progress and positively harness new tech.”


AI transformation But Mason concludes that it is ultimately helping to develop his, and the fund’s, thinking. “In the Surrey pension team, we are at the start of a digital transformation programme which will specifically focus on how AI and automation can mecha- nise our service delivery function. “We are fortunate that we are able to focus so explicitly in this area since many digital transformations struggle to identify target areas and spread their efforts too thinly. We are commit- ted to resourcing our programme appropriately – another pit fall for others in the digital race – and will be working in close partnership with some of our key suppliers.”


Mason also notes the importance of up-skilling his team, in the way Cao highlights, while also again acknowledging the chal- lenges. “We also know that we will need to up-skill our people and bring in specialist skill sets to help us with our journey. Attempting to gear up for the future in an environment where there is such rapid change is exhilarating and terrifying in equal measures. But we are buckled up and ready to start the journey,” he adds. But for many investors the issue of how AI will work as a use- ful investment tool can be difficult to comprehend. In an attempt to address the many grey areas surrounding AI, Deloitte has offered investors a route through the AI maze with a five-pronged approach in how to embrace it effectively.


AI tool


The first is to clearly define an AI strategy. This may sound simple, but it is important in articulating an understanding of how AI will be utilised as part of the investment model. A key part of this will be the need to evaluate the implications from a risk perspective.


The second is to determine the AI path going-forward. Here a so-called ‘pilot, prove and scale approach’ will demonstrate business value. Firms can start by identifying, evaluating and presenting options for creating value.


Some countries will be developing this technology for nefarious purposes and could lead to a global AI arms race.


Martha Lane Fox


Third, is for investors not to be distracted from understanding and appraising the long-term implications of AI. And in so doing, make the appropriate investments in talent and technol- ogy needed for the transformation ahead. Four, embrace strategic collaborations and partnerships to solve issues collectively and benefit from collective ideas, shared capabilities and investment. This will enable inves- tors to sustainably develop differentiated products and services. Five, work with industry stakeholders and engage with indus- try associations and regulators. As a successful wide-scale adoption of AI in investment management will require firms to work with a broad set of stakeholders. The issue here, it could be noted, is whether such groups are themselves up to speed on the issue of AI.


“The AI journey will undoubtedly be challenging, but the opportunities for investment management firms will be trans- formative,” concludes the report. Indeed, there are some huge forecasts on how big AI can become. According to McKinsey, by 2030 AI technologies will generate more than $3.5trn (£2.8bn) worth of value. PwC pre- dicts a 14% boost to global GDP by the end of the decade, thanks to AI – a much welcome fillip for everyone, particularly investors. It is, therefore, imperative for investors to seize the opportunities this new technology offers. All the signs point to them doing just that, albeit at a slow and cautious pace.


Issue 124 June 2023 | portfolio institutional | 21


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