Beyond The Balance Sheet: A Deep Dive Into How Asset Classes And Technology Are Shaping The Future Of Work In Investment Management

• The future of work for investment managers depends on which asset classes they choose to deploy capital into.
• Technological platforms empower investment managers with the tools, information, and analysis to navigate financial markets with more transparency and efficiency.
• As global populations continue to rise and wealth moves into the pockets of younger generations who are more comfortable with e-commerce transactions, new norms will include the presence of a robot assisting decision making and judgment calls.

Investment management is a very specific industry that has unique job requirements as it relates to the future of work. To adequately understand how the future of work will change for investment managers, one must analyze asset classes investment managers work with on a regular basis.

What is Investment Management?

Simply put, investment managers oversee and make decisions about the allocation of funds for individuals and institutions. They invest in and analyze other people’s wealth to create returns for their clients or their investors. Investment managers work in a variety of asset classes, including but not limited to, public equities, private equities, alternative assets, commodities, real estate, and even something as diverse as a Broadway musical.

The types of investors and clients investment managers work with depends largely on the cachet of the firm, as well as the track record and experience of the investment managers themselves. Investment managers also work with investees, the companies that receive investment funds, and act as intermediaries between their clients and these investees. They manage their clients’ wealth by allocating funds into each asset class. The alignment of interest among these parties is a fundamental aspect of the investment management industry.

How Asset Classes Affect the Future of Work for Investment Managers

The future of work for investment managers depends on which asset classes they choose to deploy capital into. On one end of the extreme, if you take into consideration public equities, it is infrequent for an investment manager to conduct a physical visit and a series of in-person meetings with management of a large Fortune 500 publicly listed entity. The public equity investment management industry has evolved in a way that in-person due diligence is less necessary because of the regulation and transparency requirements of many listed companies.

On the other end of the extreme, you can consider asset classes like alternative investment management or commodities. If an investment manager recommends to their client that they invest in a tea farm located in Asia that has proprietary farming techniques, which may lead to an outsized yield and therefore a greater return per acre, then the due diligence is very likely to be in person and physical.

How Technology in Investment Management Affects the Future of Work

Technology plays different roles in each of the investment managers’ jobs for each of these asset classes. Continuing with the spectrum of our analysis, there’s a vast array of tools such as Bloomberg terminals that are available to public equity investment managers and analysts. Many hedge funds and public equity investors have even developed their own proprietary trading algorithms and data lakes to make inferences about how a public equity stock price will change based on trends in the market and macroeconomic forces. 

Startup technologies such as augmented reality, virtual reality, or classic video communication platforms play roles in spending time with founders and farm owners in the example of our tea opportunity. These technologies may allow the investment manager to gain a more frequent touch base with the people involved in an investment opportunity.

The need for financial reporting and financial statements are a consistent area of overlap between investors of all asset classes. This is impacted equally by technology and the future of work across all asset classes. Regardless of whether one is considering a tea farm in Asia or a fortune 10 New York Stock Exchange listed entity, investment managers need access to the same set of financial information such as the income statement, cash flow statement, balance sheet, customer contracts, customer details, etc. to determine if the investment opportunity meets the risk appetite of their client or investor.

This is one area where the future of work will not change. Investment managers seek returns for their clients that are competitive based on the contractual arrangements they have with each client or limited partner (LP). In order to evaluate the benefits of a particular opportunity, investment managers will always need access to financial information. Technological platforms similar to Bloomberg terminals, Ycharts, AlphaSense, Morningstar Direct and S&P Capital IQ empower investment managers with the tools, information and analysis to navigate financial markets with more transparency and efficiency.

A final consideration of the impacts of the future of work and investment management comes down to artificial intelligence, and the way decisions are made within investment management. As already outlined, investment managers are seeking returns for their clients regardless of the asset class. AI engines do very well with lots of data and are much less effective in data sparse and highly analog or offline opportunities. A somewhat comedic example is that a robot will not go to meet the farmers of a tea farm and a robot will not be able to determine if the farmers have a viable business offering. But a robot will excel when it comes to reviewing thousands of pieces of financial data that are available in the public domain for a publicly listed entity and then relating that financial data back to current events, wars, and other nations, as well as

Federal Reserve and Central Bank interest rates in other nations. AI certainly has a role to play in each of these asset classes, but AI’s role in decision making will remain highly diminished for more complex or offline asset classes such as alternative investments and private equities, when compared to other asset classes like public equities or real estate for which much data is available.

While discussing technology, investment management, and the future of work, it is important to take into consideration how clients and the investors of the investment managers make decisions. As global populations continue to rise and wealth moves into the pockets of younger generations who are more comfortable with e-commerce transactions, new norms will include the presence of a robot assisting decision making and judgment calls. Unless AI overcomes the struggle with nuanced emotional interactions and ethical decisions, it cannot completely replace in person and human to human interactions.