A Northern Trust survey found 98 per cent of investment managers were seeking to incorporate data science to optimise their investment performance in the hunt for alpha.
Investment managers that have become pressured by rising costs, increased transparency demands and the need to generate consistent performance, aim to use data to position their firms for the future and to optimise their investment strategies and operational efficiency.
In a global survey conducted in collaboration with WBR Insights, respondents prioritised five to eight sources of investment data including ESG data and traditional factor data, with alternative, consumer and sentiment increasingly used in the search for new sources of alpha.
However, more than half of all respondents were using spreadsheets to aggregate internal and fundamental data.
The Chicago-based financial services company, Northern Trust, revealed 57 per cent of respondents said their data strategy included leveraging a central platform for investment data consolidation, whilst nearly half (48 per cent) admitted that their organisations are still measuring the investment skill-level of their investment team by using a “qualitative measurement, which mainly relies on anecdotal evidence of proper decision-making.”
“This survey shows asset managers are aware of the need to implement a digital operating model that enables efficient and safe growth, but at the same time are rightly focused on the imperative to spend scarce capital wisely.” Paul Fahey, head of investment data science at Northern Trust, comments.
He adds: “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, head of Global Strategic Solutions at Northern Trust says:“There is evidence that incorporating investment data science helps 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.”
Northern Trust issued a white paper titled The Art of Alpha: It’s All About Investment Data Science, offering insights on how asset managers can improve investment outcomes with data strategies that leverage technology more effectively, applying data science and behavioural analytics to processes that have resided on spreadsheets or other documents.
