How Can Tech Change Alternative Investments?
Technology is indeed the catalyst in evolving markets, industries and investments.
It has indeed transformed many industries. Nearly all aspects of investments are at present being automated. Robo-advisors are quickly taking over human interactions.
Activities such as manufacturing, transportation, distribution, and agriculture are being transformed. New and effective strategies like the computer based algorithms are being used in forming trading strategies and also in the actual trading.
Yes, indeed, technology has transformed many products and in extension, processes in nearly all industries. The focus is on value provision in order to improve:
- Customer satisfaction
- Business efficiency
Digitization in itself has assisted many businesses to penetrate the existing markets. With the advent of e-business, trades can be conducted virtually anywhere. New customer niches are being discovered.
When we consider the value that technology and digitization has brought especially in the alternative investment sectors, it is enormous!
Robo- Advisors as an Alternative to a Human
The first consideration is on Robo-advisors.
They are the new face of portfolio management. With these, you can easily manage and access your portfolio without having to be physically present with your financial advisor.
They employ computer generated algorithms which are exact and accurate. In as far as expenses are concerned, an investor gets to save on costs that are specific to portfolio management. Robo-advisors are said to be the best pick among the millennial generation.
This generation does not easily fit in with the old model of investments which had human financial advisors and many intermediaries. Thus, with the increase in young investors and professionals, robo-advisors will greatly enhance their experience.
The second is on Cognitive Analytics.
Alternative investments are set to benefit from the cutting edge technology that cognitive analytics bring. The work of many managers will be greatly enhanced by:
- Speech recognition interfaces
- Computer vision capabilities
- Natural language processing interfaces
With the above technologies, money managers will be able to study shifting markets in the real-time by use of digital fronts. In fact, their work will be greatly enhanced by social media since it provides a real-time interface.
The third consideration is on machine learning and big data in relation to alpha.
With the advances in technology, investors now talk of smart data rather than big data. This shift had helped investors to make better predictions, having a trickling positive effect to alpha. Better alpha generation is a beneficial tool to any investor’s portfolio.
The impact of technology is to be felt in nearly all aspects of an investment value chain. For portfolio managers, the new interface will ease their work of investing. The middle office will enjoy better facilitation of trades to clients owing to the input of robo-advisors.
Clients will benefit from the increased financial literacy since there will be many educational tools available. The back office is not left out. Activities such as fund accounting and risk management can be greatly enhanced by blockchain technology.
Blockchain provides a cutting edge ledger technology that’s distributed in order to assist in the disintermediate payments and settlements. With this, all parties involved will benefit from great cost reductions.
Alternative Investment Industry
Indeed, the alternative investment industry is set to reap big from technology. The only setback that can provide a worst case scenario is complacency. This is further aggravated by the cloud of conservatism that engulfs old school business managers.
The implication being the change that technology brings is not readily accepted and implemented. Thus, the investments stay at risk of being left behind.
In conclusion, technology can revolutionize the alternative investment industry. The positive value will be felt with increased market transparency which will incentive capable investors to consider alternative investments.