In quest to generate alpha, fund managers see GenAI as ‘holy grail’: Citigroup

Investment managers view generative artificial intelligence (GenAI) as the “holy grail” to create value, but the availability of data and cultural change are some of the main challenges, according to a Citigroup executive.

The industry has applied AI via a “three-pronged” approach, according to a Citigroup report published this week based on more than 40 interviews conducted with C-suite executives of top global investment firms, many of which have operations in Asia, including Hong Kong.

The most common use of AI is to enhance operational efficiency and productivity, followed by investment research and client engagement, according to the report. The third envisions the potential of using GenAI in alpha generation, investment decisions, or automated creation and management of funds.

“For the investment management industry, the holy grail is to find an alpha generation idea,” Helen Krause, head of global data insights at Citigroup, said in an interview with the Post.

But right now generative AI is not yet there from the perspective of helping generate additional returns on its own, she added.

Many investment industry players started to explore and find uses for the technology after Microsoft-backed OpenAI launched the groundbreaking ChatGPT GenAI app in November 2022. Generative AI describes algorithms that can be used to create new content, including audio, code, images, text, simulations and videos. Large language models such as ChatGPT are deep-learning AI algorithms that can recognise, summarise, translate, predict and generate content using very large data sets.