Is it possible that artificial intelligence (AI) and machine learning (ML) applications could one day enable individuals to get the best possible return on their savings, regardless of the size of their portfolio? ?
Posted at 6:00 am
The answer is yes, but we have no time to lose, believes Claude Perron, President Emeritus of Gestion Cristallin. “Without artificial intelligence to support our management processes, we are quickly overwhelmed,” he says. Periods of high volatility in the financial markets, such as those we are currently experiencing, are certainly a reminder to all savers and investors of their vulnerability to the complexities of efficient investments.
Artificial intelligence is now part of the decor in most sectors of the economy, and Quebec is at the forefront of its development. But not in finance and certainly not in asset management.
The development of artificial intelligence tools has become a niche that makes Montreal a global leader. But its main players such as MILA, IVADO and Scale AI have a generalist approach where finance and mainly wealth management have taken little space until now.
According to a recent survey by the CFA Institute, only 10% of portfolio managers use artificial intelligence and machine learning in their management processes.
construction of a laboratory
But that could change. After two years of preparation, a group was created in early 2021 whose mission is to provide Montreal with a laboratory (Finance Innovation & Risk Management (FIRM) Labs) where we will develop artificial intelligence tools specifically adapted to wealth management.
Claude Perron, who founded FIAMtl (Alternative Investment Forum of Montreal) a few years ago, and Ruslan Goyenko, Associate Professor of Finance at McGill University’s Desautels Faculty of Management and Visiting Professor at the Yale School of Finance, are the initiators of the initiative , whose aim is to first create a generic research laboratory, the results of which can be disseminated publicly. Professor Goyenko is the Scientific Director of FIRM Labs and he was the architect of the preparation process.
“Giving everyone access to the best resources to increase their savings is certainly a social issue, but this will only be achievable to the extent that there are conditions that favor the deployment of the talent here in this cutting-edge sector,” said Claude Perron.
Successful proof of concept
In May 2021, 12 PhD or Masters students in computer science, electrical engineering, finance and economics were selected from a pool of 80 applicants to take part in a six-week training program in which they were exposed to cutting-edge AI/AA research with applications in finance mainly focused to investment and asset management.
Five of them were selected to demonstrate to the Montreal financial industry how AI/AA can help large wealth managers make better asset allocation decisions.
Ruslan Goyenko, Associate Professor of Finance at McGill University’s Desautels School of Management
A proof of concept was created in collaboration with the Desjardins portfolio management teams. “We wanted to take this opportunity to show new ways to improve our management processes, since one of the main objectives of the project was to create links between science and practice,” explains Julien Béland, Senior Advisor at Desjardins. The work of the FIRM Labs group made it possible to add 50 basis points to their asset allocation benchmark, taking into account the risk limits set. “The proof of concept was conclusive,” says Julien Béland.
AI at EVOVEST
No one doubts that the big players in asset management in Montreal, such as Caisse de depot et Placement, PSP, Fiera Capital and Desjardins, all of which have also participated in FIRM Labs’ Proof of Concept, are already bearing fruit of their own AI/AA -Research on their management.
Some smaller managers do this as well, and funds using artificial intelligence tools are eventually offered to the public. This is the case with EVOVEST, among others. “We use artificial intelligence because it allows us to identify the best potential investments thanks to its ability to analyze a large amount of financial and macroeconomic information,” explains Carl Dussault, President of the company founded in 2017. EVOVEST manages a portfolio of global stocks and artificial intelligence allows to analyze 2,500 companies every week.
The EVOVEST global equity fund is now three years old and the results speak for themselves. Between January 31, 2019 and March 31, 2019, the Fund returned 12.9% annualized, while its benchmark index (the MSCI World Index) returned 8.3%. EVOVEST plans to soon create an exchange traded fund that will replicate its global equity funds.