A rising fund manager star at T Rowe Price predicts that computers will become increasingly important in asset management, supplanting the industry’s traditional backbone of human stock pickers, economists and analysts.
Sudhir Nanda, the head of T. Rowe’s new dedicated “quantitative management” arm, has for the past decade managed the $761bn asset manager’s Diversified Small-Cap Growth Fund, a $2.3bn computer-powered, systematic vehicle that invests in small US companies. The fund has outperformed 93 per cent of its peers over the past five years, returning over 10 per cent annually, according to Bloomberg data.
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T. Rowe last week launched three new funds to complement Mr Nanda’s own vehicle, underscoring the rising interest in more systematic, computer-aided investment approaches even among the big traditional asset managers.
Quantitative hedge funds, which utilise powerful computers, complex mathematical models and automated trading algorithms have been around for several decades, but Mr Nanda predicts that the traditional investment management industry will also become increasingly technology driven.
“Having a human is still important. Humans aren’t going to be completely replaced, but they will be mostly replaced,” he said.
Asset managers including BlackRock, Goldman Sachs Asset Management and Schroders are pouring money into new technology, “big data” and more computer programmers to ensure they do not fall by the wayside in an increasingly ruthless investment world, where many fund managers have over time failed to beat their indices.
While Mr Nanda stressed that T. Rowe’s own human portfolio managers have a decent record of navigating financial markets, he said it was inevitable that many jobs would naturally be done more efficiently and cheaply by computers.
“Our humans have done pretty well compared to most humans, but we definitely see a trend where machines do more and more in markets,” he said. “They’re becoming more powerful, so they’re going to do more.”
Our humans have done pretty well compared to most humans, but we definitely see a trend where machines do more and more in markets
– Sudhir Nanda
In a speech this year Andrew Haldane, the Bank of England’s chief economist, considered whether there was an industrial revolution brewing in the finance industry — brought on by huge strides in technology — that might see many jobs replaced by robots.
“Driven by significant advances in technological capabilities, the explosion of big data, more powerful software and low-cost, scalable cloud computing, artificial intelligence appears to finally be at a real tipping point,” the Institute of International Finance, a finance industry trade body, wrote in a report last month.
“The use of AI in financial services is likely to have an outsized impact on functions and employment as the automation of advanced roles becomes feasible,” the report concluded.
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