Human creativity needs to outsmart the robots, says Allianz GI manager

Students wanting to working in asset management face a shrinking job market as technology takes over from humans – but it’s still possible to “outsmart” the robots, says a senior Singapore-based portfolio manager.

“The next generation of asset managers – people who are at university now or about to attend university – will be the ones who really have to compete with the robots,” says Kunal Ghosh, a portfolio manager for quantitative global and international equity strategies at Allianz Global Investors.

“The asset management industry will be more challenging for them, with fewer players offering them jobs,” says Ghosh, speaking to eFinancialCareers on the sidelines of the Singapore Asset Management Conference, organised by students at Yale-NUS College.

Graduates entering the industry today need to be “smarter” than their predecessors if they are to thrive in an increasingly tech-driven sector, he adds.

“As an asset manager, you don’t beat a robot by giving it the key to an F1 car – you must be the driver of that car,” says Ghosh. “And in order to drive it, you must be creative.”

“If the market trend is for passive management, do you want to go passive like everyone else, or is it best to be creative and remain active? You must be able to look at a problem in a way that can’t be done by an algorithm.”

An algorithm can “only lead you down a certain number of paths”, says Ghosh. “Algorithms help about 40% of the market, so there’s still room for human creativity.”

Ghosh’s seven-strong team, which is based in Singapore and San Diego, is building a “behavioural-finance all-stock quant model” that he says is unique in the industry.

It’s based on Princeton Psychology Professor Daniel Kahneman’s theory of a dual-process human mind. ‘System 1’ of the mind is fast, intuitive, automatic and impressionistic, while ‘system 2’ is slow, deliberate and effortful.

“Immediately after the Brexit vote, for example, most investors automatically used system 1 and over-reached themselves in their investments as a result,” says Ghosh. “In hindsight, it would have been better to have used system 2.”

“We are trying to replicate these anomalies and use system 2 within our model. Our job is essentially to outsmart the rest of the world,” he adds.

Ghosh says the key to career success in asset management is to see your work as an “intellectual challenge”.

“There aren’t many jobs where you have the potential to make forecasts across every sector of the economy. That’s both fun and rewarding,” he explains.

“But graduates who come into this industry because they see it as an alternative to investment banking – as a way of making money quickly – are bound to be disappointed. They’ll find that asset management doesn’t involve as much aggressive selling as IBD does.”

Image credit: SIphotography, Getty