Editorial Board Spotlight: Honing the AI edge with Naoya Sugimoto

Even as artificial intelligence (AI) takes centre stage in the investment landscape, the potential of the technology has been less of a surprise for Naoya Sugimoto, co-chief investment officer and head of the global investments department at the Japan University Fund (JUF).

“Around 2018-19, I started thinking that AI technology, beyond simple statistical analysis, can be utilised for finance and investment management. And in the last few years, the technology has been dramatically expanding with the use of generative AI,” Sugimoto told AsianInvestor.

AI was a key component of Sugimoto's bachelor degree in electrical engineering and then his master of computer science degree at the University of Tokyo in the early 2000s.

THIRD WAVE

Sugimoto considers the current hype around AI as the 'third wave' within technology. 

Naoya Sugimoto
JUF

He said he started his career during what he defines as the second “winter” between booms.

“AI was not a popular area for research at the time, but I believed that AI [had the potential to] impact a wide range of areas. I was curious about the general impact to society and how a machine could start to learn and, in a way, think,” Sugimoto said.

Interestingly, Sugimoto started his career as a researcher in cryptography, the process of hiding or coding information so that only the person a message was intended for can read it.

His skills included advanced mathematics and statistics, which would later prove useful when he was modelling mortgage-backed security products and derivatives as a quant analyst.

He added to that experience with stints in portfolio modelling and financial engineering.

GROWING POTENTIAL

So how does JUF plan to use AI to manage a portfolio worth ¥10.96 trillion?

“I see two directions for AI: one is it is an investment theme. The other is utilising AI for multimodal analysis, meaning that it can analyse different formats of numbers, texts and images in various type of files and documents,” said Sugimoto.

Established in 2021, JUF started investing in March 2022 and is a relatively new asset owner.

It is still at the stage where it is considering whether AI expertise should be hired in-house, outsourced to third-party specialists or a combination of the two.

“For senior investment professionals at asset owners, it will be key to understand what AI can and cannot do, rather than having deep technical knowledge,” Sugimoto said.

He also sees a future for AI within asset management

“A key element of asset management is the process of gathering and inputting data for the best possible investment decisions. Input quality will dramatically increase as even more granular information can be analysed by AI.

"But ultimately, people need to make the decisions, and technology cannot replace professional relations to asset managers,” he said.

REWARDING PURPOSE

Clearly Sugimoto has shown himself to be very versatile and in the role at JUF, he finds himself in another fulfilling and rewarding position.

“I believe that science is one of the key drivers of Japan’s future. If I can contribute to the national initiative to fund and stimulate academic excellence, it will be very rewarding for me,” he said.

JUF, managed by the Japan Science and Technology Agency (JST), is tasked with securing long-term and stable financial resources for Japanese universities so that they can strengthen their academic research infrastructure.

Outside of work, the 44-year-old co-CIO is a father of three children aged three, five and eight.

“After I became a father, I think more about the future rather than the present, and how I can do something beneficial for the long term,” he said.

It puts an extra spring in his step as he works everyday, he says, knowing that the purpose of the fund is to encourage academic research that can create a better world.

“It is very motivating to be handed the responsibility to generate the returns for these efforts. It would make me proud if a scientific breakthrough in 20-30 years was made possible partly because of funding from the Japan University Fund,” Sugimoto said.