The Investment Association (IA) and Technology Working Group have published recommendations on how the UK investment management industry can harness the potential of new technologies, such as artificial intelligence (AI).

Their report, AI: Current and Future Usage Within Investment Management, outlined common use cases and examined enablers and barriers for longer-term AI adoption.

It also set out recommendations for future AI integration in the investment management industry.

This follows two previous phases of work that focused on the application of distributed ledger technology (DLT) to UK fund infrastructure through tokenisation.

The IA and Tech Working Group said DLT and AI presented significant opportunities for the investment management sector and investors, most powerfully when they are paired together.

They called for the establishment of regulatory clarity and consistency to help developers and users of AI to plan and invest with confidence.

The report recommended closer coordination between regulators and further development of AI standards.

Furthermore, it recommended that a UK fintech ecosystem with strong international connections should be built, which investment management firms can leverage to gain access to innovative solutions, specialised knowledge, and valuable insights.

Joint public and private sector action on AI-enabled fraud to combat scams, and fight cybercrime and misinformation, was also recommended.

Finally, the report called for the management of systemic risk through collective understanding and identifying best practice in risk management, and argued that the changing profile of system risk in the financial sector should not be a reason to hold back innovation.

“It’s been a privilege for the IA to be involved in the Technology Working Group,” commented IA CEO, Chris Cummings.

“The collaborative effort with policymakers, regulators and market participants has demonstrated strong appetite to galvanise industry progress.

“There is potential to embed AI in nearly every function of investment management, to enable better products, services and business growth. In turn, this could help millions of domestic investors and the UK economy.

“Many firms are already exploring the innovative opportunities of AI to bring about better outcomes for clients and consumers, and the recommendations in this report offer a blueprint to move beyond early use cases to more significant integration and transformation.”

Legal & General Investment Management CEO and Technology Working Group chair, Michelle Scrimgeour, added: “Chairing the Technology Working Group has been an honour and a vital opportunity to explore emerging technologies which will define the future of the asset management industry.

“We began the journey several years ago with the implementation of analytical AI, which has been foundational in algorithmic trading and anti-money laundering monitoring. However, the use of AI is evolving at great pace and the advent of generative AI is a capability that marks a real paradigm shift for our industry.

“When paired with the promise shown with tokenisation, the new technological innovations outlined in this report have the potential to redefine how we think about asset management over the next decade.”

Also commenting on the report, Financial Conduct Authority (FCA) executive director of markets and international, Sarah Pritchard, said: “The FCA is committed to fostering an environment that encourages technological progress and innovation while ensuring the safety and integrity of our financial markets.

“We welcome today’s report as an important milestone. I look forward to continuing our collaboration with industry, government and policy makers as this work progresses.”

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