The Technological Investor: Deeper Innovation Through Reorientation

Abstract

Institutional investors have long struggled to manage their own technology, and widely fail at using advanced investment-related technologies to create competitive advantages. These technological disadvantages have had many negative ramifications for institutional investors, such as being exploited by financial intermediaries with more sophisticated technology, and hindering institutional investors’ more generic innovativeness and performance. But there is hope. Today, we believe this era of technological disadvantage is now coming to an end. Based on an extensive, multi-year investigation of institutional investors and their technological hurdles, we present a new path forward, wherein institutional investors become empowered through technology and use it to propel continual, deep innovation in how they generate financial returns. We describe a collection of specific, pragmatic changes that institutional investors should pursue with respect to data quality, culture, communication, and cooperation with one other. We also look deeper into the future and discuss how reorientation around these changes can let institutional investors embrace revolutionary technologies – like artificial-intelligence systems – to transform their capabilities and become the financial giants that we know they should be.

Keywords: institutional investing, technology, governance, data management