Generative AI is poised to be a game changer for many industries, including banking and finance. J.P. Morgan already employs artificial intelligence in areas like risk management and fraud detection — and has been doing so for years. But with the rapid rise of generative AI tools and their widening reach of applications, the race is on to develop competitive offerings.
To this end, J.P. Morgan has launched a new set of stock indices for institutional investors — called Quest IndexGPT — that uses OpenAI’s GPT-4 large language model (LLM) to generate keywords related to a specific theme. The keywords are then used to identify news articles written about companies for mentions of those keywords. The product is deployed within the firm’s Quest framework, which builds thematic indices for institutional clients in areas such as AI, cloud computing, e-sports and renewable energy.
The firm’s first client-facing offering using LLM technology
Quest IndexGPT is the brainchild of Commercial & Investment Bank Strategic Index Structuring team, which worked closely with the firmwide Chief Data & Analytics Office. It joins a long list of indices managed by the firm. J.P. Morgan’s Strategic Indices business administers more than 5,000 indices, covering all major asset classes, geographies and common investment themes. But Quest IndexGPT is J.P. Morgan’s first client-facing offering that harnesses LLM technology. While humans are still ultimately responsible for overseeing its use, the capabilities brought about by GPT-4 bring greater efficiency, speed and accuracy to the task of constructing investment indices by enabling a more representative selection of keywords.
“In the past, the process of finding stock portfolios that track themes such as cloud computing or cybersecurity was complicated. Now, we use AI to systematically generate the keywords that help us identify the relevant stocks,” explained Deepak Maharaj, Head of the Equities Strategic Indices team. “With GPT-4, the keyword generation is superior to older models, and therefore our clients benefit from a potentially more accurate representation of the theme.”
“The use of GPT-4 in this offering is just one of the exciting ways in which we are strategically implementing AI methods to drive business outcomes across the firm.”
Lily McInerney
Head of Equities Evolution, J.P. Morgan
Scaling AI across the firm
The indices were offered to institutional clients at the beginning of May after a period of pilot testing, and clients can now access them via Bloomberg and the Vida trading platforms.
“The new launch has received a positive response and interest from clients. They have expressed their excitement and curiosity about the innovative feature of using GPT-4 in the index construction process,” said Arnaud Jobert, Global Head of Equities Structuring and Co-Head of Strategic Indices. “This launch is part of a broader effort to thoughtfully apply AI techniques to support our global Strategic Indices business over the coming months and years.”
Attention is now turning to other potential use cases in the business. “The use of GPT-4 in this offering is just one of the exciting ways in which we are strategically implementing AI methods to drive business outcomes across the firm,” said Lily McInerney, Head of Equities Evolution.
Important information
Each Quest IndexGPT index is designed to track the price return of a notional basket of equity securities selected from a pre-set universe and weighted based on the relevance of a pre-set list of keywords to the issuers of such securities, subject to portfolio liquidity and concentration limits. While the keywords referenced by each index were generated prior to the launch of that index with certain input from a version of ChatGPT, those keywords will not be updated over time. The methodology of each index is static and does not use generative artificial intelligence (including any version of ChatGPT) in any way in connection with the ongoing administration of that index or the selection of the components of that index.
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