Gen AI takes priority for asset managers as ESG excitement cools

The asset management space stands at a crucial inflection point as firms reckon with a growing complexity from economic, technological, and market crosscurrents, according to the latest annual global survey report from the Index Industry Association.

The IIA’s fourth annual global survey of asset managers, conducted by Opinium, gathered insights from 300 chief financial officers, chief investment officers, and portfolio managers across Europe and the US, revealing key challenges and opportunities shaping the asset management landscape.

“Asset managers globally are grappling with both short-term volatility and more profound, longer-term structural forces tied to technological innovation and the growth of new markets,” Rick Redding, CEO of the IIA, said in a statement Tuesday.

Generative artificial intelligence has become a focal point within firms, with two-thirds of respondents identifying it as the most discussed topic over the past year. The survey reports widespread adoption of AI tools in asset managers’ operations and decision-making, including personalized financial advice, market trend analysis, portfolio optimization, and risk assessment.

On the ESG front, asset managers’ expectations for portfolio growth have tempered compared to previous years.

While they forecast that 27.5 percent of their portfolios will integrate ESG components by 2025, increasing to 33.9 percent by 2027, these figures are notably lower than the previous one- and three-year projections of 48.2 percent and 57.4 percent in the 2022/23 edition of the survey.

Nonetheless, sustainable investing remains a priority, with 51 percent citing it as a key focus, and 39 percent viewing it as a business opportunity.

The survey also highlighted mixed sentiments toward private markets. US respondents and CIOs are more optimistic compared to their counterparts across the pond, with 45 percent seeing opportunity in the private space.

Other data point to an expanding role for index providers is gaining prominence, with 52 percent of managers expecting their importance to rise over the next year. Against that backdrop, roughly a quarter of respondents shared a demand for AI applications in indexes (desired by 27 percent of asset managers), more customized indexes (25 percent), and direct indexing solutions (24 percent).

“Whatever their views, asset managers identify index providers as valuable partners and a critical source of innovation which is a strong signal of continued growth for the entire ecosystem around indexing,” said Fiona Bassett, IIA chair and CEO of FTSE Russell.