Asset managers are increasingly turning to artificial intelligence to help provide research and due diligence on potential investments.
Managers have long used AI for sentiment analysis and to quickly find relevant information and patterns in quarterly earnings reports. But new, powerful and customizable platforms are emerging that screen new sources of investment data on potential companies, streamlining and speeding up the process of due diligence. Reports and investment summaries on investments can then be produced in a fraction of the time that a human could do the same task.
This in turn allows analysts and portfolio managers to reallocate their time to face-to-face client interaction or servicing existing relationships and investments. Several portfolio managers told II that they already do or intend to take advantage of the technology in this way.
Discussing how the new technology was infiltrating investment decisions in new ways, one portfolio manager who oversees a large team of analysts and global equity products told of how he had used an AI-driven research platform to generate information of a recent Treasury-bond related incident and how it might impact existing investments, something he said that would previously have taken a junior analyst at least two weeks to produce but instead took him “a matter of minutes” using an AI-driven research tool.
The source was quick to add that this simply freed up the junior analyst’s time to do “more important work.” But he also confirmed that the firm – a well-known asset manager – also had plans to hire fewer junior analysts in the year to come. There was, of course, no direct connection between these two trends, he added.
Bespoke Tools
Some asset managers have developed their own systems for this work. Schroders Capital has an internal system, known as the Generative AI Investment Analyst (GAiiA) platform, which everyone on the team involved in private equity and co- or direct investments has had access to initially and can interact with, and is being made available to every one involved in investment decision making at the firm.
The tool can help to create a draft investment memo. A human analyst will then verify and do additional analysis and finalize the document, which is ultimately submitted to the investment committee. The research is based on specific documents that are provided to the tool, meaning that the answers are based on an analysis of very specific content, which significantly reduces the risk of so-called “hallucinations.” Importantly, AI is instructed to create a document to always contain clickable sources that show where information was taken from to help with verification. Investment professionals can also use the tool to probe the original document and dive deeper into or verify certain aspects, or to update and regenerate the initial graphs it produced based on additional user input.
“The main purpose of this is about consistency, quality of the analysis and of the investment decision making,” said Nils Rode, CIO of Schroders Capital. “There is some productivity gain because these tools can do things that humans cannot. Our colleagues can now use these tools, but this is not at all about replacing people.”
On Monday, the firm also announced the introduction of a new tool that provides a virtual ‘investment committee agent’ to work alongside GAiiA. Using Schroders Capital’s historic investment data it is intended to contribute further insights into topics like sector dynamics, business model considerations and risk factors.
The skill level and experience of private equity investment professionals remains superior to what any AI can do today or in the future, he added, suggesting that this tool is simply an “accelerator” in a process that still needs human verification.
“There is still a lot to do be done for anybody in the investment team, but it’s also similar to a promotion for anybody using the tool in the sense that they can focus on the more interesting things,” he said. “So that’s why this has been fully embraced but is not replacing anybody.”
A firm with the size and resources of Schroders can develop its own artificial intelligence for its investors to use, but this is a luxury only afforded by those of a certain scale. Companies like martini.ai are forming that are seeking to bridge that gap. Specialists in corporate credit research, the offering has certain costs for upgraded services, but essentially offers free research and insights into companies’ credit risks. Rajiv Bhat, co-founder and CEO, said that the product helps analysts in this specific part of the industry that are “drowning doing the same kind of analysis over and over again,” doing financials and creating credit scores and reports. With the tool this is now possible incredibly quickly.
One function of martini.ai is the ability to input a portfolio and quickly assess how it would likely perform in the instance of a difficult scenario, an invasion or geopolitical event say, with expected losses and changes reported in real time.
“This not only helps analysts and portfolio managers do what they’re doing much, much faster, but also gives them access to a whole new set of instruments that they were never able to access before,” he said.
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Holding a virtual monopoly in a product on which the artificial intelligence boom relies should be a golden ticket. For chipmaker Nvidia, it has been. But ASML, which makes extraordinarily complex machines that etch silicon and is no less integral to the rise of AI, has found that ruling the roost can still be an up-and-down affair.
The €270bn Dutch manufacturer, which reports its earnings next week, is a sine qua non of technology; chips powering AI and even fridges are invariably etched by ASML’s kit. The flipside is its exposure to customers’ fortunes and politics.
Revenue is inherently lumpy, and a single paused purchase makes a big dent — a key difference from fellow AI monopolist Nvidia, which is at present struggling to meet demand for its top-end chips. ASML’s newest high numerical aperture (NA) systems go for €380mn; as an example of how volatile revenue can be for such big-ticket items, one delayed order would be akin to drivers holding off on buying 8,000-odd Teslas.
Initial hopes were high for robust spending on wafer fab equipment this year and next. Semi, an industry body, in December reckoned on an increase of 7 per cent this year and twice that in 2026. Jefferies, for example, now expects sales to flatline next year.
Mood music bears that out. Top chipmaker TSMC has sounded more cautious over the timing of the adoption of new high NA machines. Other big customers are reining in spending. Intel in April shaved its capital expenditure plans by $2bn to $18bn, while consensus numbers for Samsung Electronics suggest the South Korean chipmaker will underspend last year’s $39bn capex budget.
Politics is also getting thornier. Washington, seeking to hobble China’s tech prowess, has banned sales of ASML’s more advanced machines. Going further would hurt. China, which buys the less advanced but more profitable deep ultraviolet machines, typically accounts for about a quarter of sales. Last year, catch-up on orders lifted that to half.
Meanwhile, Chinese homegrown competition, given an extra nudge by US trade barriers, is evolving. Shenzhen government-backed SiCarrier, for example, claims to have encroached on ASML territory with lithography capable of producing less advanced chips.
The good news is that catch-up in this industry, with a 5,000-strong supplier base and armies of engineers, requires years if not decades. Customers, too, will probably be deferring rather than nixing purchases. The zippier machines help customers juice yields; Intel reckons it cuts processes on a given layer from 40 steps to just 10.
Over time, ASML’s enviable market position looks solid — and perhaps more so than that of Nvidia, whose customers are increasingly trying to create their own chips. Yet the kit-maker’s shares have been the rockier investment. In the past year, ASML has shrunk by a third while Nvidia has risen by a quarter; its market capitalisation is within a whisker of $4tn. That makes ASML the braver bet, but by no means a worse one.
Astrolight is developing a laser-based communications system
I’m led through a series of concrete corridors at Vilnius University, Lithuania; the murals give a Soviet-era vibe, and it seems an unlikely location for a high-tech lab working on a laser communication system.
But that’s where you’ll find the headquarters of Astrolight, a six-year-old Lithuanian space-tech start-up that has just raised €2.8m ($2.3m; £2.4m) to build what it calls an “optical data highway”.
You could think of the tech as invisible internet cables, designed to link up satellites with Earth.
The company hopes to be part of a shift from traditional radio frequency-based communication, to faster, more secure and higher-bandwidth laser technology.
Astrolight’s space laser technology could have defence applications as well, which is timely given Russia’s current aggressive attitude towards its neighbours.
Astrolight is already part of Nato’s Diana project (Defence Innovation Accelerator for the North Atlantic), an incubator, set up in 2023 to apply civilian technology to defence challenges.
In Astrolight’s case, Nato is keen to leverage its fast, hack-proof laser communications to transmit crucial intelligence in defence operations – something the Lithuanian Navy is already doing.
It approached Astrolight three years ago looking for a laser that would allow ships to communicate during radio silence.
“So we said, ‘all right – we know how to do it for space. It looks like we can do it also for terrestrial applications’,” recalls Astrolight co-founder and CEO Laurynas Maciulis, who’s based in Lithuania’s capital, Vilnius.
For the military his company’s tech is attractive, as the laser system is difficult to intercept or jam.
It’s also about “low detectability”, Mr Maciulis adds:
“If you turn on your radio transmitter in Ukraine, you’re immediately becoming a target, because it’s easy to track. So with this technology, because the information travels in a very narrow laser beam, it’s very difficult to detect.”
Astrolight
Astrolight’s system is difficult to detect or jam
Worth about £2.5bn, Lithuania’s defence budget is small when you compare it to larger countries like the UK, which spends around £54bn a year.
But if you look at defence spending as a percentage of GDP, then Lithuania is spending more than many bigger countries.
Around 3% of its GDP is spent on defence, and that’s set to rise to 5.5%. By comparison, UK defence spending is worth 2.5% of GDP.
Recognised for its strength in niche technologies like Astrolight’s lasers, 30% of Lithuania’s space projects have received EU funding, compared with the EU national average of 17%.
“Space technology is rapidly becoming an increasingly integrated element of Lithuania’s broader defence and resilience strategy,” says Invest Lithuania’s Šarūnas Genys, who is the body’s head of manufacturing sector, and defence sector expert.
Space tech can often have civilian and military uses.
Mr Genys gives the example of Lithuanian life sciences firm Delta Biosciences, which is preparing a mission to the International Space Station to test radiation-resistant medical compounds.
“While developed for spaceflight, these innovations could also support special operations forces operating in high-radiation environments,” he says.
He adds that Vilnius-based Kongsberg NanoAvionics has secured a major contract to manufacture hundreds of satellites.
“While primarily commercial, such infrastructure has inherent dual-use potential supporting encrypted communications and real-time intelligence, surveillance, and reconnaissance across NATO’s eastern flank,” says Mr Genys.
BlackSwan Space
Lithuania should invest in its domestic space tech says Tomas Malinauskas
Going hand in hand with Astrolight’s laser technology is the autonomous satellite navigation system fellow Lithuanian space-tech start-up Blackswan Space has developed.
Blackswan Space’s “vision based navigation system” allows satellites to be programmed and repositioned independently of a human based at a ground control centre who, its founders say, won’t be able to keep up with the sheer volume of satellites launching in the coming years.
In a defence environment, the same technology can be used to remotely destroy an enemy satellite, as well as to train soldiers by creating battle simulations.
But the sales pitch to the Lithuanian military hasn’t necessarily been straightforward, acknowledges Tomas Malinauskas, Blackswan Space’s chief commercial officer.
He’s also concerned that government funding for the sector isn’t matching the level of innovation coming out of it.
He points out that instead of spending $300m on a US-made drone, the government could invest in a constellation of small satellites.
“Build your own capability for communication and intelligence gathering of enemy countries, rather than a drone that is going to be shot down in the first two hours of a conflict,” argues Mr Malinauskas, also based in Vilnius.
“It would be a big boost for our small space community, but as well, it would be a long-term, sustainable value-add for the future of the Lithuanian military.”
Space Hub LT
Eglė Elena Šataitė leads a government agency supporting space tech
Eglė Elena Šataitė is the head of Space Hub LT, a Vilnius-based agency supporting space companies as part of Lithuania’s government-funded Innovation Agency.
“Our government is, of course, aware of the reality of where we live, and that we have to invest more in security and defence – and we have to admit that space technologies are the ones that are enabling defence technologies,” says Ms Šataitė.
The country’s Minister for Economy and Innovation, Lukas Savickas, says he understands Mr Malinauskas’ concern and is looking at government spending on developing space tech.
“Space technology is one of the highest added-value creating sectors, as it is known for its horizontality; many space-based solutions go in line with biotech, AI, new materials, optics, ICT and other fields of innovation,” says Mr Savickas.
Whatever happens with government funding, the Lithuanian appetite for innovation remains strong.
“We always have to prove to others that we belong on the global stage,” says Dominykas Milasius, co-founder of Delta Biosciences.
“And everything we do is also geopolitical… we have to build up critical value offerings, sciences and other critical technologies, to make our allies understand that it’s probably good to protect Lithuania.”
