Investment managers looking more to data

Investment managers pressured by rising costs, increased transparency and performance demands are beginning to rely more on data, according to a survey.

The survey featured 300 global asset management firms sponsored by Northern Trust and conducted by WBR Insights.

Northern Trust’s white paper ‘The Art of Alpha: It’s All About Investment Data Science’, found 98% of respondents were already using, planning to pursue or were interested in incorporating data science/decision-support tools into their investment process in the next one to two years.

However, while 57% of respondents said their data strategy included leveraging a central platform for investment data consolidation, nearly half (48%) admitted that their organizations were still measuring the investment skill-level of their investment team by using a qualitative measurement, which relied on anecdotal evidence of proper decision-making.

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Other findings included:

• 66% of respondents said they currently leveraged five to eight sources of investment data, with environmental, social and governance (ESG) data (59%) and traditional factor data (55%) prioritised but alternative, consumer and sentiment increasingly used in the search for new sources of alpha;
• 52% said their organisations were still using spreadsheets to aggregate internal and fundamental data, while other data sources were accessed manually (email, PDF, etc.) and integrated to make investment decisions; and
• 52% of respondents said “making their best investment ideas repeatable” was the investment process that could most benefit from data analytics.

Paul Fahey, Northern Trust head of investment data science (IDS), said the survey showed asset managers were aware of the need to implement a digital operating model that enabled efficient and safe growth.

“But at the same time are rightly focused on the imperative to spend scarce capital wisely,” Fahey said.

“As evidence grows around the value of investment data science, asset managers are looking to their data to help them drive high quality outcomes so they can invest more effectively in their core activities.”

Gary Paulin, Northern Trust head of global strategic solutions, said there was growing evidence that incorporating investment data science helped managers better meet their obligations to regulators, owners and investors.

“Asset managers need to become more digitally conversant, not only because it will lead to improved investment outcomes, but because it’s being demanded more by their stakeholders, who are leveraging data science tools to do analysis of their own,” Paulin said.