The way asset managers like BlackRock approach investing has been profoundly changed by the convergence of big data, data science, and artificial intelligence (AI).
With assets under management totaling a staggering US$9.42 trillion as of June 30, BlackRock stands as the world’s largest money manager and is poised to harness the power of rapidly evolving technologies to create more robust portfolios for its clients.
At the heart of this transformation is the utilization of AI models powered by machine learning.
These models have the ability to process vast amounts of data, providing valuable insights to investment analysts.
Jeff Shen, co-CIO and co-head of systematic active equity at BlackRock, emphasizes the invaluable role of AI in helping investment professionals assess economic conditions.
He notes that daily news, broker reports, expert insights, and government statistics all offer a treasure trove of data that can be effectively analyzed by AI to offer insights into the underlying economic landscape.
Additionally, geospatial information, which includes data on the movement of vehicles or foot traffic patterns, offers a unique perspective on economic trends.
For instance, the movement of trucks in and out of a company’s warehouses or fluctuations in urban foot traffic can serve as valuable indicators of economic activity.
Shen emphasizes that we are currently living in an era where big data has become omnipresent, and AI, coupled with generative AI models, is reshaping virtually every industry.
He believes that investment is no exception to this transformation.
Generative AI tools, often rooted in large language models (LLMs) such as Microsoft-backed OpenAI’s ChatGPT and Baidu’s Ernie Bot, are gaining worldwide attention and are being explored by businesses eager to tap into their transformative potential.
Shen leads a diverse team, consisting of individuals with Ph.D.s, including computer scientists, engineers, physicists, and mathematicians, alongside traditional finance analysts.
This team is already applying LLM-based AI to the construction of portfolios, enhancing their analytical capabilities.
BlackRock’s Pioneering Finance-Specific Language Models
Crucially, BlackRock’s investment in AI is not merely about achieving efficiency or replacing human expertise; it’s about enhancing the investment analysis process.
Large language models (LLMs) are deep-learning AI algorithms with the capability to recognize, summarize, translate, predict, and generate content using extensive datasets.
What distinguishes BlackRock is its proactive approach to LLMs. Rather than relying on off-the-shelf solutions, the company is investing in the development of finance-specific language models, trained on financial markets and investment-related text.
This specialization enables BlackRock to navigate the complex world of finance with unparalleled precision.
The application of LLMs in data analysis offers numerous advantages. It costs less than 1% of what hiring a human analyst would cost while delivering comparable performance.
A recent study conducted by Damo Academy, the in-house research arm of Chinese e-commerce giant Alibaba Group Holding, in collaboration with Singapore’s Nanyang Technological University, underscored the cost-effectiveness and efficiency of LLMs in data analysis.
BlackRock’s enthusiasm for the synergy between AI and investment analysis reflects a broader trend within the finance industry.
As big data, data science, and AI continue to evolve, asset managers like BlackRock are leveraging technology to gain deeper insights into market conditions, identify investment themes, and uncover opportunities for enhancing investment outcomes.
The future of investment lies in a harmonious coexistence between human expertise and AI-powered tools, a transformative partnership that is rewriting the rules of finance.
Source: South China Morning Post