This article was first published in the 23rd edition of the Fact Book on 24 June 2025.
Artificial Intelligence - AI - is increasingly taking centre stage in the public debate across all sectors of the economy. Global powers now consider AI a critical technology with the potential to radically change our economies. The ‘AI Race’ is now at full throttle, and the EU is determined to close the innovation gap it has with other jurisdictions, in order to assert its sovereignty and global competitiveness. Yet what exactly is new about AI that has taken the world by storm?
First, it is important to point out that AI has existed for many decades. Logistic and linear regression models, along with other supervised machine learning techniques, have long been used in financial services to analyse data and make predictions. However, AI has taken enormous strides in recent years, significantly expanding the boundaries of what had previously been considered possible.
One of the most notable breakthroughs has been the introduction of transformers – complex algorithms that form a core component of Large Language Models (LLMs), which in turn power Generative AI (GenAI). The recent advancements in GenAI enable the processing and synthesis of vast amounts of data at levels far beyond previous capabilities. As a result, we now have non-deterministic models that can produce a range of possible outputs from the same input – a fundamental shift in how machines process and generate information.
The transformative potential of AI for the global economy - and the asset management industry in particular - is immense. While asset management firms are already reporting notable efficiency and productivity gains from incorporating AI into their processes, there is reason to believe that AI use cases and capabilities may have a more central and strategic role in the future. These technologies could – and often already do – enhance key functions such as investment operations, risk monitoring, investment research and data-driven decision-making within investment management. Nevertheless, integrating AI technologies into the core business of our companies – namely, the management of funds and portfolios – is certainly not without its challenges.
From an EU perspective, there is also a practical reality that must be addressed: the introduction of the EU AI Act, often cited as the world’s first comprehensive AI law. Officially adopted in 2024, it introduces a ‘risk-based’ framework, by which each AI use case needs to be classified according to the level of risk it poses to users; namely, prohibited, high, transparency and minimum risk. It thus establishes different levels of obligations for providers and deployers of AI systems, depending on the assigned level of risk.
The EU AI Act is horizontal in nature; it applies across all sectors and encompasses many with vastly different levels of AI maturity and risk. This is a key consideration for the asset management industry – a highly regulated sector that is already subject to extensive risk mitigation and investor protection requirements. For example, our member firms are already subject to a comprehensive set of obligations relating to due diligence, risk management and governance frameworks, such as those set out under UCITS and AIFMDs.
There remains a significant degree of legal uncertainty surrounding the implementation of the EU AI Act, a situation that must be addressed. Notably, the general application of the Act, including provisions concerning high-risk AI systems, will not take effect until August 2026. Many of the AI Act’s obligations - particularly those relating to risk mitigation techniques - are largely covered by the comprehensive set of requirements applicable to asset managers. For this reason, it is essential that the implementation of the AI Act remains consistent with – and complementary to – the existing regulatory framework applicable to our sector.
Finally, while ensuring an efficient implementation of the EU AI Act remains a top priority, we should not lose sight of the potential for the asset management industry to contribute to making Europe a global leader in this strategically critical technology. Market-driven, standard-setting initiatives – such as EFAMA’s AI System Assessment Tool – are extremely valuable, as they show that the industry is both willing and able to develop practical tools for supporting compliance requirements with the AI Act. These efforts will ultimately help create value for investors and build trust in the responsible use of AI within financial services. To position Europe as a global frontrunner in AI, the industry must continue its proactive role in proposing solutions that address the region’s current innovation challenges.
Notes to Editors
Access the original article here.
