Fund managers unsure about expenditures on AI

While budgets for artificial intelligence (AI) capabilities continue to grow across the fund management industry, many aren't sure if they are spending the right amount, new Clearwater Analytics research found.

According to the study, which included responses from some 178 fund managers across Australia, Singapore, Hong Kong, the US and Europe, 63% increased AI spending by more than 50% in the past 12 months and not a single firm reported a budget decrease.

One in four (25%) believes their organisation is still not investing enough in AI, while a striking 66% noted their firms have over-invested in the innovation.

Meanwhile, AI has already been embedded in fund managers' operations, investment decisions and risk management, as 43% now use AI for 25-49% of their investment decision-making, while 10% rely on it for "the majority" of their investment calls.

Close to two in five (38%) apply AI to 25-49% of their risk processes, and 8% use it for most risk assessments. Across operations, 34% integrate AI into 25-49% of operational decisions; 6% use AI for over half of their operational workflows, the study found.

Contrary to the narrative of an industry playing catch-up, the research reveals that AI adoption in asset management is more mature than commonly assumed.

Clearwater Analytics said the findings highlighted the industry is not at the beginning of its AI journey - it is in the middle of it, and the challenge now is to scale it effectively. This is evident with many already integrating AI four to five years ago (56%), and a further 34% started their journey two to three years back.

Only 9% have begun AI integration within the past year.

"Together, these findings expose a fault line running through the industry: for all the conviction that AI is essential, there is no consensus on what the right level of commitment looks like in practice - and for an industry where capital allocation decisions carry significant weight, that lack of consensus carries real risk," Clearwater Analytics said.

And the debate now is to determine the right level of investments moving forward, as 13% report AI investment increased by over 100% in the past 12 months and 50% saw expenditure rise between 50% and 99%, with only 4% looking to hold budgets steady.

Commenting, Clearwater Analytics chief technology officer Souvik Das said firms that solve the challenge to institutionalise AI will be the ones that pull ahead.

"What our research reveals is an industry wrestling with how to get AI right. Increasing the budget is the easy part. The harder challenge is institutionalising AI in a way that drives genuine alpha and operational excellence, rather than simply adding cost and complexity," Das said.

"When the infrastructure is right, AI doesn't just work, it compounds. It identifies data anomalies in real-time, reduces the manual burden on risk and operations teams, and frees people to focus on the high-value strategic work that actually moves the needle."