An inaugural study into the state of innovation in the asset management industry has shown that 85% of managers are deploying advanced analytics within their firm and a further 55% are working with alternative data, yet only 10% are generating substantial and sustainable value from these programmes.
The report, from analytics advisory firm Element22, found that the majority of firms (55%) are in the early stages of their advanced analytics projects while 10% have only just started.
According to Element22, most asset managers invest heavily in the early stages of innovation-themed and promote experimentation and these levels then decline as the focus switches to areas of success. Those that go on to develop business confidence from their programmes will typically increase their investment with a fortunate few attaining a return on investment.
The study, which was sponsored by UBS Asset Management, found that the firms most aggressively pursuing these projects are investing between 2-3% of annual revenue while those in the middle of their projects plan to increase investment by 240% over the next three years.
In terms of where advanced analytics are being applied, the vast majority (95%) are using it for alpha generation compared to 75% for business operations and 70% for client acquisition.
The most popular form of advanced analytics is machine learning, used by 90%, with natural language processing and robotic processing automation used to a lesser extent.
Founding partner of Element22, Predrag Dizdarevic, said that the research revealed “broad-based experimentation” across the industry but urged those firms at the beginning of their advanced analytics projects to be more aggressive or risk “falling insurmountably behind the leaders which could be a key differentiator in the industry”.
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