AI is causing a fundamental shift across multiple industries. We have recently seen the SaaSpocalypse, Altruist's AI tool Hazel wipe $150bn from valuations in 48 hours (and losses have only partially recovered), AI industry insider Matt Shumer's blog reaching over 80 million readers with a stark warning on how powerful and world-changing AI is becoming, and a frankly frightening memo from Citrini Research which sent further shockwaves through markets. Framed as a dispatch from June 2028, it presents a scenario where AI displaces human jobs, leading to economic crises. Everyone is wondering just how their industry and jobs will be affected.

The investment industry has already been hit, but more is to come. Hazel was purported to support advisers rather than replace them. If that was the market's reaction, what will happen with the arrival of sophisticated tools designed to replace expert investment advice or management outright? As one analyst put it, this is just the tip of the iceberg. And with AI systems now beginning to train themselves, the pace of improvement is sky- rocketing.

Active asset management has been fighting a decade-long battle to justify itself against passive investment. Compared to what AI is becoming, passives are a blunt instrument. AI-driven investment will be able to execute any strategy, process and analyse more complex information quickly and at very little cost, while continually improving. This prompts a provocative question: in a world where AI executes the full range of strategies with full market access, could markets approach optimal efficiency? And if so, what exactly does an active management fee pay for? Fee pressure will only worsen, eroding margins and driving consolidation – as the Nuveen acquisition of Schroders signals – while empowering a new generation of retail investors to execute near institutional-grade strategies at a fraction of the cost.

So how does active management justify itself? This will of course depend on the firm, but we can see four areas where managers must nail down exactly how they bring value beyond AI.

- Information. AI is only as good as the information that feeds it. Proprietary data becomes ever more valuable. What does a firm have that widely accessible AI doesn’t? And when information is incomplete or unreliable, such as in private or emerging markets, how do experienced investors navigate that in ways AI can't?

- Access. This includes relationships, networks, proprietary deal flow, and the ability to sit across the table from a founder or CEO. AI cannot get a foot in the door, build trust or read a room by itself. Managers of funds with restricted capacity and business founders won’t provide access, or leading analysts their research, to AI over people they know and respect. Being well-connected and accessing opportunities that are not widely available will be a key edge.

- Experience and discipline. AI can tell a retail investor exactly what to do but it cannot stop them selling at the bottom. The fortitude to hold through a drawdown, conviction built over decades of market cycles, and the ability to manage client behaviour in moments of heightened emotion is not something a model learns. As one comment on the Shumer blog put it: "As AI absorbs the execution layer across every industry, institutional judgement doesn't just remain valuable – it becomes the entire value."

- Concentration risk. AI will execute a dazzling variety of strategies – long/short, value, growth, macro, contrarian – with efficiency no human team can match. However, if powered by a handful of underlying models that use the same data and share the same blind spots, then this diversity is misleading. The ECB and Financial Stability Board have flagged the systemic risk this creates. The very technology threatening active managers may, in concentrating the market's thinking, create ideal conditions for active outperformance by using the human edge.

None of this matters, however, if it isn't communicated well. Today's clients have AI tools that can benchmark a fund's fees, assess portfolio exposure and interrogate track record in minutes. It will also compress differentiation, dilute accountability and reduce human interaction, meaning a manager's voice, identity and values become key USPs. Investors will increasingly gravitate towards firms they know, understand and trust – not just those with the strongest performance. As the Wall Street Journal recently reported, companies are desperately seeking storytellers in the age of AI because, as content becomes abundant and generic, a distinctive and credible narrative becomes ever more valuable.

For asset managers this cuts two ways: the narrative must resonate with human audiences but must also be clear and consistent enough to feed the AI tools that clients and journalists use to evaluate managers. Identifying the genuine edge, shaping a story that highlights it, and landing these messages across every touchpoint – RFPs, investor updates, “owned content” on social media and the website, and in “earned” media – is not straightforward but is more important than ever. The firms that thrive will be those who work out what an experienced human still does better and ensure the market knows it.

If this has sparked questions about how you’re communicating your edge and which messages are landing with the audiences that matter, get in touch. We’d love to sit down, talk through your positioning, and explore where the opportunities are.