When it comes to portfolio construction, the integration of AI technologies, including GenAI, introduces a host of ethical considerations and regulatory hurdles. One pressing question revolves around the transparency and "explainability" of AI systems employed in decision-making processes, particularly in meeting fiduciary obligations. While AI has the potential to analyze vast amounts of data, identify patterns, and make data-driven investment decisions, the need for human intervention by licensed advisors and/or traders remains paramount, and will remain as such for the foreseeable future.
Encouragingly, global AI regulation is evolving and showing alignment across key areas:
- Accountability and Oversight
- Transparency and Interpretability
- Data Privacy
- Bias and Fairness
- Security
Additionally, regulatory bodies will continue to navigate the following topics:
- Defining AI and its scope in a manner that ensures consistent governance
- Understanding various industry applications and industry needs
- Focus on areas where AI is most at risk, without dampening innovation
Celent's latest report, Harnessing the Power of GenAI: Accelerating Portfolio Construction | Celent explores the potential use of GenAI during the portfolio construction process, including the regulatory and ethical challenges of its application.
