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  • Tolmas Wong, CFA

Fintech is now in the CFA© Program exam syllabus. Here's one way it could help Portfolio Managem


Man and Machine in Portfolio Management.

Since the new syllabus was released in 2019, the CFA Institute has included readings on fintech across the Level I and Level II CFA© Program exam syllabus.

Instead of taking an antagonistic Man vs Machine perspective, we can consider the possibility of both working together to create a better future for investors.

Humans can learn to coexist with machines by understanding how evolving financial technology works, and combine it with human judgement to improve our research capabilities and help us select better investments.

One example is using AI to detect if a earnings call statement given by a CEO contains deception - a task that currently proves challenging for financial analysts, who must consider the CEO/CFO's financial statement alongside validating the company's financial reports.

Using text analytics, machines can now review earnings call transcripts and spot when CEOs try to duck tough questions.

Bloomberg tested this software on the transcript of an infamous Tesla quarterly earnings call given by Elon Musk in May 2018, and it ended up scoring high on "deception".

This was the same call where Musk berated an analyst for asking 'boring' questions.

Indeed, as US fund manager T. Rowe Price said: "Numbers tell only half the story". A good portfolio manager must recognise the need for a rigorous approach when selecting and managing the investments in their funds.

So when faced with the topic of fintech, don't ask: will humans be replaced by machines in future?

Instead, think: How can we harness emerging fintech capabilities into portfolio management and equity research?

About the author

Tolmas Wong, CFA is the AB Maximus trainer for Portfolio Management. He is currently Director of Corporate Broking at CGS-CIMB Securities and an adjunct lecturer at the Singapore Management University. He has held positions at United Overseas Bank, Citicorp Vickers and Schroder Securities, and was a board member of CFA® Society Singapore and the Asian Securities Analysts Federation.

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