What do you get when you cross technologists with investment professionals? A different kind of number game.
Adrenalin flowed freely in London this November when experts from tech startups in New York, London, Milan and Bangalore caught up with investment experts from Allianz Global Investors (AllianzGI) to brainstorm on using technology to improve investment decisions.
30 hackers, 10 teams, 49 hours and 3 challenges: the Allianz Hackathon had all the ingredients of an exciting game show - How can Artificial Intelligence and alternative data complement traditional data analysis to improve asset class forecasts? How can AI algorithms limit systematic cognitive bias in the process of selecting stocks? Which alternative data sources such as social media, search engines, job portals and online marketplaces can complement AllianzGI’s own research and how?
Around 100 participants watched as startups presented their ideas to experts from AllianzGI and Allianz Asset Management as well as to an external venture capitalist. The best solution for each of the three ‘challenges’ will be implemented as a prototype in 2019 together with the winning company.
Thorsten Heymann, the Global Head of Strategy at AllianzGI and the host of the hackathon, believes that AI and Big Data in active management could offer big advantages for customers. Excerpts from an interview:
- How did the hackathon go?
Thorsten Heymann: "It was exciting! The hackathon was yet another step in our digital transformation journey. The technological developments based on AI, machine learning and alternative data are rapid. There are obvious advantages. We have been using technology in active management for a while, to develop the best possible performance for our customers. This is why we at AllianzGI have invested heavily in quantitative investment approaches in recent years and have built up AI expertise in all relevant asset classes. We hope that the symbiosis of this experience with young technology startup talents will enable us to further extend our lead."
- What does this mean in concrete terms?
"One question, for example, is how can forecasts be optimized if we have alternative data, such as social media data, analyzed by AI algorithms in addition to existing traditional financial data? Or whether we can use AI to identify cognitive distortions in investment decisions, which will enable us to minimize human biases in the process of selecting securities in the future. These two questions are aimed at making proven approaches even more efficient using the latest technology."
- Other than portfolio management, what other parts of asset management can benefit from digitalization?
"Digitalization can also help to further develop the asset management industry’s distribution channels. Robo advisors are not a fad and they will have a significant impact on the younger generation of investors. We have been working actively with Moneyfarm to jointly develop new customer solutions. The solutions are based on the technical know-how of the digital wealth manager and our active investment expertise, combined with sensible risk optimization. We are currently testing the first results in pilot projects and we hope to be able to communicate and offer them more broadly in the coming year. We are pursuing a similar approach in Germany in close cooperation with the Allianz agencies. Using digital investment platforms, professional advisors can tailor investment solutions to their clients' individual return expectations and risk tolerance. We are convinced that new customer groups will also be able to approach investment and retirement provision topics via digital channels."
- So will AllianzGI go completely digital?
"No, definitely not. But we are becoming increasingly digital. In the active management of funds on which future livelihood is based, such as retirement plans, machines will not replace the skills and experience of portfolio managers. But machines can complement, enrich and optimize their services and help to improve the performance of the client's investment, provided the expectations are realistic. This also applies to the search for the right product for personal investment objectives. Around 70 percent of the clients want a hybrid approach to investing: they attach great importance to personal, trustworthy advice. But on the basis of a machine analysis of the personal starting situation, wishes and goals, personal advice can provide even more targeted support in making the best possible long-term decisions and avoiding mistakes.
Allianz Global Investors is a leading active asset manager with over 700 investment professionals in 25 offices worldwide and managing more than 500 billion euros in assets for individuals, families and institutions.
Active is the most important word in our vocabulary. Active is how we create and share value with clients. We believe in solving, not selling, and in adding value beyond pure economic gain. We invest for the long term, employing our innovative investment expertise and global resources. Our goal is to ensure a superior experience for our clients, wherever they are based and whatever their investment needs.
Allianz Global Investors