HDFC AMC’s Navneet Munot warns against cutting analyst jobs for AI: ‘Firm will have trouble 20 years…

The latest market report highlights that Artificial intelligence may automate several routine tasks in fund management, but mutual fund houses risk weakening their future talent pipeline if they use AI as a reason to trimmed junior hiring, Navneet Munot, managing director and CEO of HDFC Asset Management, stated at the Moneycontrol Mutual Fund Summit.

Munot stated he was concerned by a growing view across the asset management industry, in India and overseas, that firms may need fewer market watchers and associates as AI takes over more of the work traditionally done by investment teams.

“I keep hearing, both in India and globally in the asset management industry, that now we don't have to have as many market watchers. Now I don't need as many people as associate,” Munot stated.

He argued that junior professionals form the pipeline from which future fund managers are built, and that investment judgement, conviction and a sense of trusteeship take years to develop.

“And I keep thinking that if I don't hire an associate today, an market observer today, how will I create that fund manager who has a deep sense of purpose, a deep sense of trusteeship, and has this contrarian thinking, has this character and the conviction 20 years later?” he stated.

According to Munot, those qualities cannot be developed only by working on financial models. They are additionally shaped by observing experienced market participants, understanding how decisions are made through different market cycles and learning from senior professionals within an organisation.

“All of this doesn't come from just working on your models. It comes from seeing people. It comes from seeing the environment. It comes from learning from your elders in the firm,” he stated.

Investment culture, he further noted, will stay important even as technology takes over more analytical work.

“Anybody who's thinking that I won't hire the juniors or I will reduce the number of people, that firm will have trouble 20 years later,” Munot stated.

India’s investment universe is getting bigger

Munot additionally pointed to the rapid expansion of India's investable universe as another reason asset managers will keep need analytical talent even as AI becomes more capable.

He cited the example of a mid-cap fund where the same fund manager had scaled from managing around Rs 100 crore to around Rs 1 lakh crore.

While a larger fund does not necessarily require a proportionate gain in the number of fund managers, the number of firms that investment teams need to track has expanded sharply.

“The overall universe, which would have been 100 firms when it started, now is running into like 500 firms at our end. And this is going to gain,” he stated.

Munot stated the number of listed firms and the volume of information that investment teams need to process could keep climb as India’s capital markets expand and more firms tap the public markets.

That, in turn, increases the need for market watchers who can study businesses, sectors and management teams even as AI helps accelerate information processing.

AI should augment fund managers, not replace their edge

Asset managers are increasingly using AI across areas such as information processing, scenario analysis, idea generation, portfolio construction, stress testing and back-testing.

Munot stated AI can improve the speed at which investment teams process and analyse information, but should augment rather than replace the traditional strengths of fund managers.

Human judgement, conviction, investment culture and the trust placed in fund managers, he stated, will keep matter even as machines take over a larger share of routine analytical work.