The investment research market is facing seismic shifts. What are the threats and opportunities posed by alternative data, artificial intelligence and changing buy-side/sell-side relationships?
- A new report highlights what’s shaping the future of investment research – alternative data, AI and changing buy-side/sell-side relationships.
- The regulatory, technological and competitive dynamics at play will create opportunities and threats for investment professionals.
- Our investment research solutions are assisting both buy-side and sell-side customers in these areas.
Investment research is on the cusp of some major transformational shifts.
Breakthrough technology is supplanting proven practices and fracturing long-held relationships. Meanwhile, new sources of quality information are emerging and innovation is helping to reveal signals in the noise.
But how should investment professionals be positioned to best serve clients and maintain an edge?
Thirty leading chief investment officers, portfolio managers and investment analysts from across North America, Europe and Asia have shared their thoughts on what lies ahead in a survey commissioned by us and produced by Greenwich Associates.
Their insights help identify three major themes driving the future of investment research – alternative data, artificial intelligence and changing relationships.
Each thesis holds its own for significance, yet the successful integration of these themes is paramount.
Alternative data: Embracing complementary options
In our global survey, 70 percent of respondents said they are currently using alternative data or plan to within the next 12 months.
Web-scraped data for product pricing, search trends, insights from expert networks, and web traffic data were all mentioned as sources already being employed.
And while usage of alternative data is still in the early stages, other sources are expected to gain adoption over the coming years.
These include credit card transaction data, sentiment data, footfall and geolocation data, and Internet of Things sensor data.
Hedge funds and asset managers are increasingly utilizing alternative data sets to help them gain alpha and differentiate themselves from the competition.
We already offer a number of alternative data sets.
These include the StarMine Credit risk model, which uses text mining to predict the likely financial performance of firms.
Other examples include shipping analytics data, weather risk monitor data, social media monitor data, and consumer sentiment data from Ipsos.
We also offer a number of alternative data apps in Eikon from specialist third parties, including the Insight360 app with its timely ESG insights using data collected from more than 75,000 sources.
Artificial intelligence: Mastering the data glut
Just 17 percent of firms surveyed are currently using AI as part of their investment process, but 56 percent expect this to grow significantly in the coming years.
Having the ability to quickly analyze the vast amount of news, unstructured and structured content, automate data analysis, and uncover relationships were areas identified where AI could have the most impact.
And as we’ve already identified, the expected increase in usage of alternative data is likely to be another driving force behind solutions that can quickly derive meaning from huge data sets.
We’re helping customers in this area with solutions like the Search and Discover app in Eikon. This uses machine learning to highlight news of importance, indicating the connection to a portfolio.
Our Intelligent Tagging also enables structured insights to be gained from unstructured sources by linking people, places, facts, and events across millions of articles.
Changing relationships: Enabling new alliances
We’ve seen a clear indication that the buy-side will rely on the sell-side less for research services in the next few years, with 77 percent of investment firms agreeing.
Regulations such as MiFID II, the growing adoption of alternative data, and the use of artificial intelligence are forcing the relationship between the buy-side and the sell-side to evolve.
Some of our research readership data validates this trend.
We have seen a material decline in research readership in 2018 among our large UK buy-side customers, which has a clear correlation with the introduction of MiFID II research unbundling.
As a result of these changing relationships, we expect asset managers will bring more research in-house, and the sell-side will need to innovate their way through this change, and demonstrate value.
With Eikon you can upload and co-mingle your internal research and proprietary data (such as estimates and targets) with external research so your portfolio managers can easily access it all in one place.
Our Investment Research Marketplace allows you to purchase research collections and access them over Eikon.
There’s no need for a broking relationship with the provider — and we also manage the fulfilment and billing.
Prepare for change
We offer a range of solutions that can help you prepare for seismic shifts in the investment industry.
Find out more about the results from our Future of Investment Research survey by downloading the full report.