While many business leaders believe that GenAI will disrupt their industries in the not-too-distant future, realizing the sheer potential of this new technology has proven to be much harder than it appears at first glance. In this paper, RockCreek discuses promising applications of GenAI for investment firms and analyzes their impact on organizations in terms of gains in productivity and/or competitive advantages.
Key Takeaways:
GenAI Provides Insights & Automates Tasks. GenAI solutions offer investment firms opportunities to boost productivity by automating routine tasks. They can also help firms gain a competitive advantage by generating insights, provided the firm can identify the right combinations of input data and processing methods that lead to outputs with high predictive power.
Data, Expertise & Iteration. Successful GenAI integration in investment workflows depends on several factors that include robust data preprocessing pipelines, contributions from subject matter experts during the ideation and testing phases, and the ability of the team to improve model performance based on qualitative feedback from users.
GenAI vs Conventional Machine Learning. While the general ideas and methodology underpinning the development of large language
models (LLMs) share similarities with other types of machine learning (ML) models, the solutions enabled by GenAI exhibit distinct characteristics from traditional ML models. GenAI models, unlike conventional ML models, can operate with smaller unlabeled datasets. However, evaluating GenAI solutions is more challenging due to their open-ended interactions, necessitating iterative human feedback. Overall, the development of solutions based on traditional ML models rely more heavily on the technical data science skills.
Mitigating Risk is Critical. Beyond hallucination and algorithmic bias, which are broadly recognized as risks associated with the use of GenAI models, the proliferation of these tools within organizations could create an exaggerated notion about the depth, breadth, and objectivity of the insights. It has also been observed that the use of GenAI in groups can adversely affect collective creativity as it leads to less diverse ideas.
Focus on Creating Business Value. Although many business leaders agree that GenAI will disrupt their industries in the not too-distant future, realizing the potential of GenAI has proven to be much harder than it appears. While GenAI has exciting potential, investment firms should take a pragmatic approach to implementation, focusing on creating demonstrable value through specific use cases rather than pursuing overly broad goals, which often lead to project failures.