AI in asset management: “We aim to turn the black box into a glass box”

“I like to compare our approach with driving a car”, Sara Baeten says. “At first, people were at the wheel and AI acted as a smart GPS system. AI gave suggestions, but people ultimately made the decisions. We operated the two systems – man and machine – side by side for years to ensure that we could always make adjustments where necessary. Our first AI-driven funds were introduced for early adopters. Now we’re ready to take the next step, where AI is no longer a co-pilot but a full-fledged pilot. We’re on the threshold of self-driving cars in asset management.”

KBC’s approach provides investors with important benefits. AI allows asset managers to analyse more data and generate new insights faster, which increases efficiency as well as the probability of a return. People now have a different role to play. “AI is able to recognise patterns in historical data, but only people are able to develop a vision for the future”, says Baeten. “Our analysts are evolving into trendwatchers who determine which developments investors should take into account. That vision is their actual added value.” 

This means that asset managers are increasingly adopting a bridging role between technology and market insight. “I see them as experts who know the workings of the financial markets while also understanding the operation and limitations of AI. The role of manager also calls for courage and leadership. You need to be able to intervene where necessary, but you also need to have sufficient confidence to let go of the wheel if the technology truly adds value.”

AI has also joined investment committee meetings as a valuable strategist – but one without human bias. “AI has no preferences or emotions. It’s always objective and makes decisions on the basis of data and logic. AI ideally makes the same predictions as the human experts at the meeting, but it’s also quite exciting to see how these human experts respond when they’re challenged.”

AI is able to boost human intelligence, but it cannot and should not replace human oversight, Baeten says. “AI is not a magic wand that conjures excellent results out of thin air – you still have to know how and when to use it. Although AI is technically able to conduct fully autonomous asset management, ultimate responsibility for the results still lies with us, real-life people.” 

Baeten believes the foundations of management will remain as they are. “Investing requires caution and economic justification. That will never change, not even if you integrate innovative technologies such as AI into management. We aim to turn the black box into a glass box.” 

Discipline and transparency are crucial here. “Our pioneering role and our history of over 35 years of quantitative investment give us at KBC Asset Management an incredible amount of experience to draw on. We’re also part of the large KBC Group, with its state-of-the-art infrastructure, and the numerous tools developed in-house help us see more clearly where the true added value of every signal lies. We know how every signal contributes to performance or risk. We’ll never be able to clear all the fog out of the glass cube, but hopefully we can lift the veil enough to be able to rely on the technology inside”, Baeten concludes.