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Japan’s Buy-side Poised to Embrace Machine Learning and Automation


Bloomberg’s Tokyo Buy-Side Week 2019 Participant Survey Report:

Bloomberg survey shows that majority of firms will use new technologies in investment workflows in next three years

A survey conducted at Bloomberg’s Tokyo Buy-Side Week 2019revealed that a large majority of buy-side industry participants expect to use new technologies such as machine learning and automation (90%) in their investment workflows over the next three years. About half of respondents said they would use machine learning specifically in research, analysis and investment decision-making and one-third expect new technologies to replace 30% of their operations in three years.

More than 350 buy-side industry professionals attended this year’s event, which focused on three major themes that will impact the future of the Japanese asset management industry – New technologies, ESG investing and China’s financial markets.

“At Bloomberg, we want to ensure the buy-side community is well prepared for what’s to come and position their organizations for future success,” said Norman Tweeboom, Head of Buyside Enterprise, Asia Pacific at Bloomberg. “As the asset management industry undergoes a period of massive transformation, candid conversations on these key issues will help the buyside adapt to new technologies and capitalize on on new investment opportunities in new markets.”

One of the biggest challenges in adopting new technologies cited by survey respondents is the lack of technology talent. Based on the estimates from the Ministry of Economy, Trade and Industry, there will be a shortage of over 500,000 IT professionals with cutting-edge technology skills by 2030 in Japan. More than 60% of respondents said they faced challenges recruiting technology talent. A third said they are hiring more technology professionals while 20% will rely on external vendors to roll out new technologies.

Gary Kazantsev, Head of Quant Technology Strategy in the Office of the CTO at Bloomberg, pointed out that, “Automation is already a factor across all stages of the investment process. There are funds in Japan, Europe and the U.S. that have automated their entire investment workflow. The move towards automation is already taking root among the buy-side, but it’s not evenly distributed.”

Panel discussions also highlighted the growing interest in Environmental factors of ESG investing in Japan and the latest opportunities and challenges of investing in China’s financial markets.

The survey showed that among Japanese asset managers, 70% are actively combining financial data and environmental factors in their screening criteria. 60% of respondents said that they have ESG specialized teams with proprietary sets of screening criteria and reports.

Japan has recently become the world leader in terms of the number of Japanese companies supporting The Task Force on Climate-related Financial Disclosures (TCFD), created by the G20’s Financial Stability Board in 2015 and chaired by Michael Bloomberg.

According to TCFD’s 2019 Status Report released earlier this month, around 800 companies and organizations across 49 countries support TCFD, with combined market capitalization of nearly $9.3 trillion. The percentage of companies who disclose information aligned with at least one of the Task Force’s recommendations has increased, from 70% in 2016 to 78% in 2018.

With the inclusion of Chinese bonds to the Bloomberg Barclays Global Aggregate Bond Index from April this year, developments in China’s US12 trillion bond market are closely watched by global investors. Around 85% of buyside participants polled have already invested or are considering investing in China.

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