How Investment Banks, Hedge Funds, and Investment Firms Are Using AI

Welcome to Wall Street’s AI era.

Banks, private equity firms, hedge funds, and asset managers have been eager to use generative AI to boost productivity and reduce grunt work for workers. Since OpenAI introduced ChatGPT, finance firms have moved from pockets of experimentation to scaling these generative AI tools companywide. Such tech advancements have been met with a mix of enthusiasm and cynicism.

Business Insider has been reporting on how some of finance’s biggest players are approaching artificial intelligence, from how it might impact jobs and create new ones, to the different ways firms are cutting costs and ramping up efficiencies.

But first, if you work at a Wall Street firm and are using AI, we want to hear from you. How is AI really showing up in your day-to-day? Is it living up to the hype?

Banks have accelerated their AI research and use cases

JPMorgan has a technology budget of $18 billion, with much of it going toward making sure it’s a leader in AI.

JPMorgan CEO Jamie Dimon is a “tremendous” user of the bank’s generative AI suite. While its private bankers were some of the first to be equipped with a generative AI “copilot” last May, the bank has rolled out its proprietary genAI platform to over 200,000 employees.

Executives at America’s largest bank gave an inside look at how it’s scaling tools and delivering measurable results at its Investor Day in May.

Dimon has previously said he’s out to win the AI arms race.

Goldman Sachs’ chief information officer, Marco Argenti, and head of machine learning quants, Dimitris Tsementzis, say we are at an inflection point with AI. The technology is already changing how employees at the Wall Street giant do business. CEO David Solomon has said AI is changing processes like drafting IPO filings and analyst research.

Morgan Stanley, which was an early partner of OpenAI, has been working with employees to turn their AI ideas into reality. It also had a small group of engineers build a tool that’s saved coders more than 280,000 hours so far this year.

At Citibank, generative AI is poised to change just about every employee’s job, and it has just appointed new leaders to “accelerate” its strategy.

Generative AI could be one of the most promising tech advancements on Wall Street — it may also turn out to be one of the most threatening. Four in five bank leaders surveyed by Accenture in a recent study said they feel like they can’t protect against hackers armed with AI.

Hedge funds have been on an AI hiring tear

In the ultracompetitive world of hedge funds, being ahead on the latest technology is always a priority. The rise of the AI labs and need for top quant minds has also meant that math whizzes at hedge funds and trading firms have become a target for poaching.

At this year’s Global Milken conference, executives from Citadel, WorldQuant, and Freestone Grove talked about how AI is helping them leverage their best investors.

Point72’s CTO Ilya Gaysinskiy knows that his boss, billionaire and New York Mets owner Steve Cohen, likes to win. In his first interview since joining the hedge fund last September, Gaysinskiy told BI about his big plans to ramp up Point72’s tech organization and how AI will play into that expansion.

Bridgewater launched a fund driven by AI last year. The fund’s AIA Labs worked to replicate every stage of the investment process with machine learning. The firm’s co-chief investment officer and chief scientist outlined the plans of the world’s largest hedge fund.

Balyasny Asset Management is in the midst of building the AI equivalent of a senior analyst. Charlie Flanagan, the head of applied AI at the $21 billion hedge fund, broke down his plan to amass a collection of bots to automate grunt work for analysts.

D.E. Shaw managing director Neil Katz gave BI an inside look at the quant hedge fund’s generative AI approach, which is built on three main capabilities.

Interviews with 11 AI executives, recruiters, vendors, and consultants working on Wall Street revealed the cultural challenges hedge funds might face as they use their deep pockets to lure in AI talent. These leaders can struggle to gain the trust of business leaders and break into investment teams, and AI researchers have struggled with hedge funds’ penchant for secrecy.

Private equity firms are trying to figure out how AI can boost their dealmaking and investment skills

Lucia Soares — Carlyle’s chief information officer and head of technology transformation — talked to BI about taking on a new challenge: Bringing AI to the investment giant’s 2,300 global employees.

Private equity firms are no strangers to managing and analyzing copious amounts of data — but data is only helpful if you can find it. Here’s an inside look at Blackstone’s approach to enterprise search and how it’s hoping AI will give it a leg up in its pursuit to capture more of the insurance market.

Swedish PE giant EQT built an AI engine called Motherbrain that has changed how its investors source deals. ChatGPT enables the investing giant to take the next step with its AI ambitions.

As private equity firms turn to AI for a competitive edge, Thomas H. Lee says its engineers are up to 30% more productive with help from AI coding assistants.

Asset managers are also getting in on the AI action.

AI tools are changing how stock-pickers do their job. AllianceBernstein, BlackRock, and JPMorgan opened up on how their tools are changing portfolio manager workflows.

The multi-billion-dollar investment manager VanEck invested in a Toronto-based startup and is onboarding its technology to boost its ETF business. An exec and the fintech’s CEO walked us through how AI will change analysts’ and salespeople’s jobs.

Fintechs are developing AI tools to help their employees work faster and smarter.

When the crypto exchange Kraken announced its plans to acquire a retail trading startup for $1.5 billion, the news made headlines. What went under the radar, however, was Kraken’s use of generative AI for the due diligence process of its acquisition target. Here’s how it went, and why the head of Kraken’s M&A business now sees AI as a part of his core team.

Block, billionaire Jack Dorsey’s company behind Square, Afterpay, and Cash App, developed an AI agent that’s an expert coder — it can even write code better and faster than some of the company’s top engineers.

Here’s a look inside the initiative and why Block decided to open-source it.

In 2023, the neobank Chime built its own private version of ChatGPT to help its engineers launch new products and features faster and more cheaply. The fintech’s CTO walked us through his playbook.

How AI is shaking up the tech talent market on Wall Street

The proliferation of AI in the finance industry’s tech ranks — both as builders and users — is evolving the role of developers as it becomes increasingly common to delegate much of their coding work to machines. Five industry veterans, including from Goldman Sachs, Point72, and Morgan Stanley, offered advice on how software engineers can keep their edge.

Wall Streeters, say hello to your new coworker. AI agents are beginning to permeate the labor force as assistants who can help humans with everyday tasks. Here’s how banks and startups want to give every employee their own personalized direct report.

AI is creating entirely new jobs on Wall Street. Here’s one, which has some private equity firms shelling out pay packages of up to $2 million to drum up AI at portfolio companies.

For a broader view at salaries, BI collected salary data on 8 Wall Street banks for AI roles across all levels.

Data is king for hedge funds, and Wall Street’s generative AI era offers new advantages. Here’s how much the biggest proprietary trading firms and hedge funds are willing to pay for talent, according to government data.

Top tech execs from Citadel, Goldman Sachs, and AllianceBernstein open up about how AI is changing the role of the CTO on Wall Street.

Blackstone recently hired an AI exec from Walmart to apply the technology at its some 230 portfolio companies.

AI is redefining what it takes to be a software engineer on Wall Street. Top tech execs from Goldman Sachs and Citi open up about why they want their developers to have liberal arts degrees.

Balyasny’s Bridger program, designed for incoming sell-side analysts to learn coding and AI skills, highlights the evolving skills of an analyst in the age of AI.

Business Insider spoke to five industry experts to get their take on how ChatGPT and its underlying tech could be applied to various sectors of financial services.

AI could improve the lives of investment bankers by taking on some tedious tasks, but it can also make it harder to break into and alter the skills required for entry.

Startups are looking to capitalize on Wall Street’s AI fever

Auquan only launched less than two years ago, but it’s already been signed by some big financial firms. Here’s a look at how its technology is automating research work usually done by analysts.

This startup wants to transform how investors and traders analyze data with generative AI. And it’s catching the attention, and dollars, of some of the biggest names in the hedge fund world, like Millennium Management’s founder Izzy Englander and billionaire investor Stanley Druckenmiller.

Meet Mako AI, a generative AI bot designed to solve the woes of early-career private equity associates. The startup, which launched in September, is cofounded by a former Bain and Co. consultant who worked in the PE industry and remembers the countless hours he spent on mundane tasks like collecting data, writing reports, and building formulas.

Wall Street firms know the pain of satisfying regulators, but advancements in AI are introducing a whole new level of scrutiny and complexity. Meet this startup, which automates some of the most time-intensive parts of the risk management process.

Louisa AI is a startup built to suggest potential deals for investment bankers and venture capital investors. The fintech, which was born inside Goldman Sachs by a former Goldman managing director, has suggested $800 million in deal values per quarter across a handful of clients.

Wall Street has a reputation for a hard-charging work culture, something that every junior banker learns in their life. Rogo CEO and cofounder Gabe Stengel was one such banker, sometimes staying up until 5 a.m. to create earnings summaries or to pull together presentations for superiors while at Lazard. Stengel knew there had to be a better way.