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Is AI set to shake up investment bank research?

New regulations, new technologies and evolving commercial demands are transforming the investment research industry and could reduce demand for investment bank research. But this could in turn mean accelerated uptake of artificial intelligence (AI) expertise, according to research from Greenwich Associates.

The consultancy found that approximately 70 per cent of the portfolio managers, CIOs, analysts, and other investment professionals expect MIFID II regulations and other factors to result in the further “unbundling” of investment research from trading, not only in Europe, where the rules took effect earlier this year, but around the world.

“Due to these and other changes, approximately half of these investors expect to decrease their reliance on investment bank research,” said Richard Johnson, author of The Future of Investment Research. Rather than relying on research provided by investment banks, investors will use more in-house research and will also rely more on independent researchers, while also integrating alternative data sources more tightly into their investment process.

The study found that only 17 per cent of those surveyed are currently using AI as part of their investment process, but more than half expect to increase the level of AI integration and recruit additional internal expertise, and 40 per cent expect to increase budgets for AI.

“Data science skills and AI expertise are replacing advanced degrees in quantitative finance as the most in-demand qualifications at large investment organizations,” adds Richard Johnson.


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