July 31, 2024
One can hardly open the business section of a newspaper today without immediately seeing an article about Artificial Intelligence (“AI”). Companies use the term to refer to different things, but one of the most prominent and frequently discussed types of AI used in businesses today is “generative AI.” Generative AI trains AI to absorb large amounts of data patterns and structures— so-called large-language models—so that it can learn and eventually generate new data with characteristics that are similar to the original data. Generative AI tools include popular chat-bots like ChatGPT and Claude, and search engines like Perplexity. Companies such as Google, Microsoft, Apple, and Meta have also built AI functionality into their core products.
As a firm committed to advocating for good corporate governance and the rights of shareholders, Cohen Milstein has dedicated substantial resources to understanding how AI tools can be used to supercharge our work to achieve the best results for our clients. In this article, we will share insights about how AI tools can be used by legal advocates and pension funds.
Use of AI as Advocates for Shareholders
We are at the dawn of the AI age, and many law firms have begun exploring how best to use AI to advance their clients’ interests. One simple but powerful function of AI tools is to generate accurate summaries of lengthy documents. Enforcing the securities laws often involves the review of lengthy documents, such as public companies’ filings with the Securities and Exchange Commission. Generative AI tools can quickly summarize those documents and the tools can also understand natural-language questioning about those documents, which allows our attorneys and experts to put their deep substantive knowledge to use in tandem with the AI technology to efficiently identify the most salient points.
Another important role we serve is to thoroughly investigate reported corporate wrongdoing to understand whether our institutional investor clients have been impacted. AI can accelerate our ability to conduct factual research about large numbers of companies and their officers and directors, by quickly answering numerous questions. To be sure, AI’s factual output cannot be independently relied upon due to the persistent problem of “hallucinations”—i.e., the system confidently misstating the facts. Nonetheless, AI’s factual output is often largely correct, and using it as a starting point (always coupled with independent factual verification) can accelerate our research and catalyze our ability to quickly understand an industry, company, or set of individuals who may have harmed shareholders.
Use of AI Within Pension Funds
Potential applications of AI extend far beyond the legal realm, offering transformative opportunities for our clients in various sectors, including pension funds. AI can enhance investment strategies through sophisticated algorithms that predict market trends, identify investment opportunities, and manage risks with greater precision thereby enhancing accuracy, efficiency, and financial stability. AI-driven solutions can also streamline administrative processes.
One of the primary advantages of AI in pension fund management is its ability to analyze vast amounts of financial data rapidly and accurately. While not necessarily something that is possible through chatbots such as ChatGPT, AI algorithms can identify patterns and trends that human analysts might miss, enabling more informed investment decisions that can help maximize returns on pension fund investments.
Risk management is another critical area where AI can make a substantial impact. Machine learning models can simulate various economic scenarios and stress-test portfolios, helping fund managers to anticipate potential risks and adjust their strategies accordingly. This proactive approach to risk management can safeguard the pension funds’ assets, providing more stability for the beneficiaries.
In addition to investment and risk management, AI can streamline the administrative processes associated with pension fund management. Tasks such as tracking contributions, managing payouts, and ensuring regulatory compliance can be automated using AI-powered tools. This automation reduces the likelihood of human errors. Importantly, using AI does not equate to a loss of jobs for humans; instead, it enhances the roles of those previously managing these tasks and directs resources to other important work.
In conclusion, incorporating AI into pension fund management offers a range of benefits, from improved investment strategies and risk management to more efficient administrative processes. Harnessing the power of AI may help pension funds better secure the financial futures of their pensioners. As technology continues to advance and with close oversight and testing, the potential for AI to transform pension fund management will only grow, promising even greater efficiencies and financial stability for public servants, while allowing human workers to focus on other valuable contributions.