The Use of Artificial Intelligence by Investment Advisers: Considerations Based on an Adviser's Fiduciary Duties JD Supra

Artificial intelligence (AI) is an increasingly important technology within the investment management industry.1 AI has been used in a variety of ways--including as the newest strategy for attempts to "beat the market" by outperforming passive index funds that are benchmarked against the S&P 500, despite the long-standing finding that index funds consistently win that contest.2 Investment advisers who use AI should consider the unique issues the technology raises in light of an adviser's fiduciary duty to its clients. In this client alert, we provide an overview of how AI is being used by investment advisers, the fiduciary duties applicable to investment advisers, and particular issues advisers should consider in designing AI-based programs, to ensure they are acting in the best interests of their clients.3 Under federal law, an investment adviser is a fiduciary to its clients.8