Global study reveals asset managers are concerned about the risks that AI introduces

Artificial intelligence (AI) is becoming increasingly integrated into asset management operations, yet a new study from Clearwater Analytics reveals that firms harbor significant concerns over the risks associated with this emerging technology. The Gen AI and Data Divide study, which surveyed insurance asset managers, hedge funds, private market specialists, and general asset managers, found that while AI presents clear opportunities for efficiency and generating alpha, it also introduces new vulnerabilities that require active management.

The most compelling finding concerns the disparity between AI adoption and readiness. Approximately two-thirds (62%) of asset managers expressed worry about their lack of skills and experience to utilize AI effectively, with 43% expressing very strong concern. Furthermore, over half (52%) of the surveyed firms were concerned that internal culture and resistance to change could impede adoption and readiness.

These findings suggest that for many firms, the primary obstacle to harnessing AI's potential may not be the technology itself, but rather the organizational culture surrounding it.

At the core of firms' AI concerns lies trust in the technology's outputs. Two-thirds (67%) of asset managers are worried about data governance, reliability, and integrity risks, while 64% are concerned about operational risks. As more asset managers leverage AI to support investment decision-making, 64% expressed worry about model/algorithm transparency, explainability, and bias.

Additionally, 62% of the surveyed firms are concerned about hallucinations, where AI generates plausible-sounding but false information and presents it as true. More than half (55%) of global asset managers voiced concerns over the regulatory risks of AI, with 30% expressing very strong concern.

Additionally, 58% of asset managers are worried about financial risks from AI, including credit, market, and fraud risks. Finally, 64% of respondents are concerned about the implementation costs of AI. The research also revealed that while many asset managers believe they are prepared to manage AI-enabled risks, a significant portion still has work to do.

Specifically, 16% of asset managers surveyed indicated they are not prepared for AI-enabled operational risks, and 15% admitted they are not ready to address risks arising from a lack of AI skills and experience within their organizations.