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Asset management requires global and sustainable thinking and looks to the future like few other sectors; it is fertile ground for new ideas, methods and technologies. The Zurich-based i.AM Innovation Lab seeks to maintain the cutting edge of the industry and also to develop tools that can help the sector drive and shape today’s blistering pace of change.
July 24, 2019
Like many sectors in the current economic environment, asset management is confronted with a constant gale-force wind of disruptive technologies. This is a challenge no matter how you look at it, but it is also an incredible opportunity. For some time, many players in the sector have been searching for a way to grasp this opportunity that enables them to retain control and to preserve the traditions of client focus and institutional stability, which remain key components of current and future success. Failing to find a pre-existing structure in the market that could strike this balance, the decision was taken to forge a new framework – the i.AM Innovation Lab, of which Credit Suisse Asset Management is a co-founder.
The Lab’s overall remit is to think ahead for investors and asset managers, to create better investment products and shape the future business model of the industry. To this end, it was expressly founded as an entity independent of specific asset management firms with the purpose of serving the entire asset management industry. The Lab must be agile, flexible, and bold to fulfill this frankly ambitious mission.
The last point is crucial. In our experience, the slow pace of dialogue between market participants is a critical impediment to innovation. If done correctly, such feedback loops actually can accelerate the adoption of new and improved solutions. Think of the technology industry’s long tradition of beta-testing. The parallels are not perfect, of course. Testing an imperfect solution in the market may not be an option in many areas of asset management. But accelerating the development process and creating space for proof-ofconcept demonstrations vis-à-vis clients and under market conditions are nevertheless central concerns of the i.AM Innovation Lab.
Hence successful innovation is a process that requires open, collaborative networks and that is based on shared knowledge. In its essence, innovation involves executing great ideas that create value. The different tasks of this process – namely ideation, ensuring value creation, and execution – can only happen as joint efforts in a community. The i.AM Innovation Lab has systematized its approach in order to connect academia – i.e. research – with a start-up’s energy and mentality. The three pillars that allow us to do this are as follows.
The i.AM Innovation Lab puts great emphasis on those technologies that promise to have the most profound impact on the asset management sector and the wider economy. One example is artificial intelligence (AI) and robotics. The Lab collaborates closely with Switzerland’s leading universities, sponsoring professorships and engaging in other activities to shape the practical advances of these technologies in asset management.
Robotics and AI are the driving technologies behind the automation of large parts of the global economy. AI-based asset management advice is already a reality and provides many investors with a first step into the world of asset management. This advice will only get better, more granular and more individualized as the technology advances. As a sector, we must be at the forefront of this development in order to make sure that the needs and wants of the clientele remain front and center, and also to remain relevant to today’s clients. Incidentally, this technology also represents a robust secular growth trend and, as such, is an interesting investment option above and beyond the immediate impact on the business of asset management.
As AI makes inroads into the business, new ways of storing, distributing, and updating information become possible. One important aspect is the decentralization of transaction and fund information, making the system as a whole both more efficient and more secure.
A pioneer in this technology, FundsDLT is an international platform connecting transfer agent (TA) activities, payment systems, and investors. Using distributed ledger technology and smart contracts, FundsDLT aims to dramatically improve efficiency in the fund transaction processing.
In a global first, on December 12, 2018, we successfully completed a fund order via the FundsDLT blockchain. The placement of a transaction, cash reservation at the customer’s bank, confirmation by the trading agent and share and cash booking were processed. Real money was invested in a Green Bond and a regional equity fund managed by Credit Suisse. The participants involved were Banco Best from Portugal, FundsDLT/ Fundsquare of the Luxembourg Stock Exchange, Credit Suisse Luxembourg S.A. as TA, and Credit Suisse Asset Management Zurich as project coordinator.
This successful transaction may well have been one small click for an asset manager, but a giant leap for the asset management industry.
The Innovation Lab is asset management’s answer to the accelerated world we inhabit. It was founded after our realization that there was no systematic, sector-wide framework for dealing with the challenges – and seizing the opportunities – of the rapid change that is engulfing our business and the wider economy. As an independent entity, we have great freedom to explore and develop solutions that will be offered to interested firms across the globe.
The goal of the i.AM Innovation Lab is to keep looking ahead, to find and develop new opportunities and new technologies, and to put them to work for our sector and, ultimately, our clients. Credit Suisse Asset Management is a co-founder and partner.