CAIS: How Technology is Disrupting the Alternative Investment Industry

Nov 7 2017 | 5:35pm ET

CAIS: How Technology is Disrupting the Alternative Investment Industry
By Chris Duggan, VP of Dart Enterprises

If there’s one thing that alternative investment professionals can agree on, it’s that technology is reshaping the industry. Just as robo-advisors and electronic trading have changed how we think about traditional investment management, technology is now poised to disrupt the world of alternative investment management.

This was the consensus view at a recent New York City satellite event hosted by the Cayman Alternative Investment Summit (CAIS), which brought together fund managers, institutional investors and former CAIS speakers for an evening of networking and conversation. According to an informal survey of attendees, an overwhelming majority of respondents (83%) said that their firms will increase spending on data, technology or analytics in 2018, and 30% said that cybersecurity was the top global threat for 2018, evidence of the industry’s current hyper-focus on technology.

Technology promises to play a major role in all aspects of an alternative investment firm’s operations, from blockchain and cybersecurity in the back office to machine learning and AI in the front office. Each of these technologies has different advantages and disadvantages, with firms varying widely in their adoption rates. But the future is clear, and those that don’t embrace technology now are likely to fall even further behind the competition.

This echoes the views of attendees at the 2017 Cayman Alternative Investment Summit in the Cayman Islands, which was held February 15-17 and attracted more than 500 attendees from across the alternative investment community. In a survey of more than 200 industry leaders, 25% picked cybersecurity as the biggest potential global risk in 2017, trailing only the Trump administration (44%). This proved to be a prescient finding, with several high-profile cyberattacks hitting companies, banks and governments all over the world this past year.

Of course, technology can be used for benevolent purposes too. Nearly a third of CAIS 2017 attendees thought AI would be the most disruptive technology in 2017, topping robotics/automation (19%), blockchain (18%) and cybersecurity (16%). Just three months after the conclusion of the conference, AlphaGo, a computer program developed by Google’s DeepMind AI unit, defeated the world’s No. 1 ranked Go player.

Looking ahead, 43% of industry experts believe blockchain is the technology most likely to disrupt economies over the next five years, surpassing artificial intelligence (35%), self-driving cars (18%) and robotics (4%). This is an important reminder that change tends to happen gradually, not suddenly. Although it may be exciting to imagine a world where cars and trains whisk us to our destinations and robotic assistants cater to our every need, technology is most impactful when it is first vigorously tested over many years of trial and error.

The alternative investment industry is on the front lines of many different technologies. Hedge funds have taken the lead when it comes to implementing AI and machine learning into their investment strategies, helping expedite the development of sophisticated trading algorithms with potential applications for almost every industry. Meanwhile, private equity and venture capital firms are a valuable source of private capital for many of the world’s most exciting and innovative young companies. This capital allows entrepreneurs to take more risks and explore new technologies, helping push our overall rate of technological progress forever forward.

We will continue to explore these themes and more at the 2018 Cayman Alternative Investment Summit, which is scheduled for February 8-9 at the Kimpton Seafire Resort + Spa in the Cayman Islands. In addition to discussing the latest trends and challenges facing the global alternative investment industry with executives from around the world, attendees will also have an opportunity to hear from thought leaders across the technology space, including those on the forefront of the latest advancements in blockchain, virtual reality and machine learning. Special guest speakers will include:

  • Jeremy Bailenson – founding director of Stanford University’s Virtual Human Interaction Lab and author of the upcoming book “Experience on Demand”
  • Bettina Warburg – cofounder of Animal Ventures and a thought leader in the emerging blockchain space
  • Maurice Conti – designer, futurist, innovator and Chief Innovation Officer at Telefónica Alpha, Europe’s first moonshot factory

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