13. Andy Chorlton, CIO, Fixed Income at M&G Investments: Leading and Investing Through Uncertainty

When you talk about research, like one of the, the sort of the hot topics right now is AI or, or use of sort of more technology within the research process.

What are you guys doing? What do you think are both the opportunities and the risks of, uh, of, of the sort of technology within research?

Um, so our approach is that we should use AI and technology to increase the efficiency of our analysts, but not to replace them.

Certainly not to replace their decision-making because our view is that it should allow an analyst more time to pull on different strands of information or to dig deeper on a particular topic or a particular credit or a particular sector.

But the real value is the recommendation that they make, and we don't see that as being replaced by AI because, you know, uh, I think it can get you to a certain place, but at the end of the day, whether it's, you know, whether it's a, a, a machine or an experienced analyst, what really matters isn't how quickly they populate the model, isn't how, um, w- how quickly they review earnings calls and things like that.

Fundamentally, is all that information leads to a, a recommendation.

It's the recommendation that where the value is, and we want our analysts to spend more time like thinking and less time doing, if that makes sense.

So it's not great value for money for me now for analysts to build models and after model after model, 'cause you can get technology to do that for you.

But what is valuable to me and to the portfolio managers is the analyst dissecting the conclusions and challenging the conclusions of the models or the, or the recommendations such that the recommendations are better.

So we're not aiming to cut the number of analysts.

We're looking to hopefully they'll be able to cover a few more names than they used to.

Um, but we want the value to come from the thinking rather than the doing.

And Andy, whilst AI can certainly be very positive going forward for the financial markets, is there a worry that actually it could become a little bit negative in terms of the amount of information that is then accessible by not just asset managers, but asset owners as well? And does it become at the point where there's so much data, so much information available to all, everybody's making pretty much the same decisions? What's your thinking behind that?

If everyone goes down the AI route, then there'll be like three American firms left and that's it, um, running money.

I think there's quite a lot of lazy assumptions around AI in terms of, well, AI can do this, AI can do that.

It's like any other technology or any other model, it still needs oversight and support and, and a robust framework.

And if you think of some of the scandals we've had in the industry historically, it's when black boxes haven't been adequately supervised, for want of a better term.

And so ignoring AI and what the technology is, but even most quant strategies will retain a human element for the final decision-making.

Um, and so, you know, I, I have discussions with people internally that we should be able to do lots and lots of customized mandates for clients because of AI.

And I, I worry that let's say if you take a client, so I used to have a client that, that used to stop us buying German companies.

I won't get into the reasons why.

So let's say that we're buying Deutsche Bank everywhere else, but we decide we're gonna buy BNP for th- this portfolio.

That's a fairly easy decision on the first trade.

But if we decide Deutsche Bank has become fully valued and we're looking to shift out of Deutsche Bank, what happens if BNP hasn't moved? And if, if you think, do we sell BNP back into whatever the alternate for Deutsche Bank is, or do we stick in the BNP position? And if you think of all those decision trees, there's so many factors involved in terms of valuations, the guidelines, et cetera.

It's not quite as easy to keep a consistent portfolio.