About two years ago, with the continuing release of improved AI models, it was increasingly clear that AI would transform, or at the very least, influence many service industries, including active asset management. We had two choices. We could put our heads in the sand and believe we were immune, or we could embrace the change, learn and adapt. After all, many of the largest and leading businesses in their categories, some of which we analyse and invest in, on behalf of our clients, have been using AI for years, to grow and take market share. Why would our industry, which has traditionally been people heavy, be different?
Using over 100 years of combined experienced within our Team and shareholders, we mapped out what we do and how we could create a private technological solution and repeatable process. This was not about changing our investment process, but rather, accelerating and augmenting our process. Critically in our industry, the regulatory and compliance obligations are extensive and non-negotiable. We have built our (fundamental and AI influenced) process with this at the forefront.
Through this hard work, retraining how we think, several speed bumps and gradual progress, we’ve learnt several things:
Compounding Knowledge: The legendary Warren Buffett described compound interest as the “eighth wonder of the world”. At a time of rapidly evolving AI models, the power of “compounding knowledge” may be the ninth wonder of the world. We’ve built a large knowledge base with tens of thousands of materials that we trust. We’re regularly improving how we collect, process, and leverage information. Yet, we’ve observed that alone, this is not enough. For the AI output to be most effective: experience, judgement, questioning and analysis are critical.
Further, as the knowledge base grows, the concept of scale changes. We are a small business and despite that, getting data organised, understandable, readable and in a valuable form, was challenging and time consuming. Those businesses with larger organisational structures and data in different places, may find it difficult to aggregate and coordinate information. This is in addition to the cultural shifts that we believe needed to occur to embrace and adopt AI.
In a world of AI, combining “experience” with an aggregated knowledge base may make the size of a team less relevant and challenges the belief that more people results in enhanced client outcomes. Our knowledge base is expanding rapidly and searchable using AI. We can be agile and always seeking improvements. Every Team member is encouraged to use the knowledge base to drive debate over the portfolio constitutes, opportunities and risks,
Noise: In a world full of information, AI can provide a level of stability and calm. As we explored what we wanted to build, it was tempting to try and include as much information and data as possible. We considered including articles, X posts, Reddit musings, reviews and more. After reflection, testing and assessing scenarios, we decided not to do this. Why? Extra information does not necessarily translate to better decision making. For our Team, we found that more “news” risked impacting our judgment and emotions, and created or reinforced biases – and consumed a lot of time. Our process enables us to source the inputs, documents and research that we believe to be valid and credible, which we can retrieve, engage and analyse. This has increased the confidence we have in our research process and augment what we do, particularly during challenging market periods. The health benefits are not immaterial, with improved sleep, levels of energy and a clearer mind to enhance decision-making.
Time: In the investment business, the majority of analysts have been guilty of retrieving the same information, or versions of it, many times (myself included). They may go through a similar or identical process to their colleague sitting next to them. For example, let’s assume you are considering a possible investment in a western listed luxury goods company. The process might involve an assessment of the Chinese consumer, Chinese policy, Chinese real estate, rising middle class in Asia, global travel, change in savings rates, competition from counterfeit copies, the threat from e-commerce on margins and much more. On the ground research may be required. At a high level, consider multiple views on China, informed by multiple pieces of analysis, influenced by several podcasts, calls with experts and more. All trying to gain an edge on China and what may or may not happen. This is before one analyses anything regarding the fundamentals of the company! This process takes an enormous amount of time (and we have only focused on one sub-sector). It is one of the reasons, much of the professional services industry moved towards specialisation over the past decades. “I am the expert in X…speak to my colleague about Y”. One of the consequences of specialisation has been that there are generations of the labour force who have never trained or practiced as a generalist. In investing, this can create a risk that the “expert” becomes dogmatically attached to their views and misses critical inflection points, at key market moments.
We’ve found that our AI process is of material value to generalists who can ask questions across sectors, regions and companies – and put the pieces of the puzzle together. Information can be digested by the Team in minutes, not hours, leading to more comprehensive debate, research and portfolio outcomes.
What about other parts of the business?
We have introduced AI capabilities in various forms across all parts of the business. Operationally, tasks that previously required large teams and significant manual effort can now be completed by a smaller, more agile group, freeing up the Team for higher-order analysis and decision-making, in a fast-changing market environment. The organisational structure has flattened with intelligence available to all. Onboarding of new Team members now takes hours, not weeks.
Client engagement has scaled alongside our data and operational improvements, as we have implemented AI tools to augment our internal CRM processes and improve personalisation and localised communications with our global clients, without increasing headcount.
What about results?
Within about six months of implementing AI-driven improvements, we accelerated decision making, achieved some of our best investment returns (compared to the market), flattened our organisational structure, scaled client engagement and increased the time of the Team. Whilst AI has been a significant contributor, various factors contribute to improvements and past performance does not guarantee future performance.
Why should clients care?
Our clients entrust us with their savings to help achieve their financial goals. The changes we’ve made are designed to make us more agile and effective in delivering outcomes across everything we do.
Performance remains the ultimate measure in our industry. By investing in technology and innovation, we aim to provide improved portfolio outcomes, more personalised communication, and an enhanced, data-driven dialogue with our clients.
We’ve engaged with some of the world’s leading investors and institutions, and we believe the divide between firms embracing AI and those that aren’t, is growing—and likely to widen further.
In recent months, we’ve seen a raft of companies announce improvements they are achieving from AI, or their continued investments, including:
- Norges Bank Investment Management, the world’s largest sovereign wealth fund ($1.8 trillion) and biggest single holder of stocks, with holdings in 8.500+ companies, has said they will not increase the number of employees as a result of AI and “focus on better efficiency through more use of technology.” This is a Government owned entity.
- Shopify’s CEO sent a memo to all staff in April: “Before asking for more headcount and resources, teams must demonstrate why they cannot get what they want done using AI.”
Having personally invested for over two decades, the transformation we’ve undergone at Infusive has been the most meaningful of my career. As a parent to two young kids, I’ve never valued time, clarity, and efficiency more. In a fast-moving, dynamic and humbling market, we’re focused on staying adaptable and committed to delivering returns and outcomes for our investors.
What an exciting time to be alive!
Jack