Exclusive Online Only ContentAutomation Slowly Taking Over Investment Management, Report Says
August 12, 2009
Machines are taking over management of equity assets, just as automation took over automobile assembly, notes a report issued Wednesday by Wall Street research firm Tabb Group.
Approximately 34% of U.S. equity investments are managed by a broad set of strategies that can be classified as “quantitative” or automated methods, the group estimated in the report, “The Investment Assembly Line.’’
That compares to 14% in 2000. But there was a significant dip last year, coincident with the arrival of the global financial crisis and recession. In 2008, the amount of equity assets managed by computer-driven calculations fell to $2.67 trillion, from $3.17 trillion in 2007. Tabb estimates a more than full recovery this year, with equity assets under quantitative management rising to $3.47 trillion.
Hedge funds have been actively managing assets through automated means for decades, the firm notes. Mutual funds joined the game in the last five years. Next up: Exchange-traded funds and index futures.
What is occurring is “the gradual automation of the entire investment management process across a comprehensive spectrum of investment strategies,’’ the report, authored by Paul Rowady Jr. and Adam Sussman, said.
