An Asset Allocator’s Perspective on AI Use Cases

Purdue Research Foundation Office of Investments

07-30-2024

Advancements in artificial intelligence (AI) and machine learning (ML) technologies, particularly OpenAI's ChatGPT, sparked significant interest among institutional investors, also known as asset allocators. During the fall of 2023, the Purdue Research Foundation Office of Investments (PRF OOI) delved into the potential impact and practical applications of AI within the asset allocator space and shared the findings in a white paper titled “An Asset Allocator’s Perspective on AI Use Cases.” (To receive the white paper, reach out to Blair Webb at BAWebb@prf.org.)

Like in many other industries, ChatGPT provided a glimpse into what might be possible for AI in investment use cases, prompting asset allocators to consider how AI could influence their investment strategies and operational workflows. The primary questions centered on how advancements in AI would impact existing and future investments and transform the role of asset allocators.

Over six months, PRF OOI engaged with various industry leaders, including endowments, foundations, public and corporate pensions, family offices, and registered investment advisors. These entities, managing assets ranging from $1 billion to over $40 billion, provided feedback and insight into how AI/ML integration might impact investment workflows and ultimately the technology's potential to drive efficiency and investment returns.

Key AI Applications for Asset Allocators

PRF OOI identified several use cases that could enhance both productivity and alpha generation. AI tools could offer:

• Automated Report Collection: automatically collect and organize quarterly reports from multiple sources into a central database and improve document management efficiency.
• Searchable Report Repositories: utilize generative AI to query data and gain insights from multiple documents and reports, streamlining data retrieval and analysis workflows.
• Pipeline Management: prioritize investment opportunities based on predefined criteria, optimizing investment decision-making processes.
• Pitch Deck Analysis: extract data from pitch decks and automate follow-up action items, ensuring comprehensive information gathering.
• Memo Drafting: use large language models to draft informational sections of investment memos, leveraging data from multiple sources to create coherent documents.
• Standardized Reporting: automate the creation of reports and dashboards from multiple data sources, facilitating improved governance and client communication.
• Transcription Services: convert meeting and call recordings efficiently into detailed notes.
• Network Insights: identify notable associations within a professional network universe to aid in due diligence processes.
• News Prioritization: filter and prioritize media and news items that are relevant and important, providing timely and actionable insights.

Challenges and Future Directions

Despite many promising applications, the journey toward fully integrating AI into asset allocators’ investment workflows is fraught with challenges. Questions regarding data quality, security and the complexity of AI tool integration need to be addressed. PRF OOI concluded that the initial focus should be on improving data quality to maximize the effectiveness of any future AI application integration. It also became clear that organizations will need to work closely with IT security professionals to make sure that all applications are used safely without compromising data.

PRF OOI's exploration also revealed that while off-the-shelf AI tools show potential, bespoke solutions tailored to specific needs might offer greater benefits. Collaboration with a third-party development firm highlighted the potential and limitations of current AI technologies, particularly in handling complex quantitative data.

Ongoing advancements in AI present many exciting opportunities for the asset allocator industry. Successful integration, however, hinges on addressing the data quality, security and overcoming integration challenges. As the industry evolves, continued engagement and exploration of AI technologies will be crucial in shaping the future of investment management. 

About Purdue Research Foundation

Purdue Research Foundation is a private, nonprofit foundation created to advance the mission of Purdue University. Established in 1930, the foundation accepts gifts; administers trusts; funds scholarships and grants; acquires and sells property; protects and licenses Purdue's intellectual property; and supports creating Purdue-connected startups on behalf of Purdue. The foundation manages the Purdue Research Park, Discovery Park District, Purdue Technology Centers and Purdue for Life Foundation.