Creating a successful and modern investment research process: 4 market trends to follow
This article was written by Buyside Market Specialist Phil Capone.
Extreme volatility, macroeconomic uncertainty, new geopolitical risks, and increased regulations make navigating today’s markets particularly challenging. Success requires constantly monitoring macroeconomic data, industry changes, and geopolitical events. These insights must then be properly weighted and applied to gauge investment opportunities and anticipate risks. Additionally, investment professionals are often obligated to identify investable themes and company specific catalysts which may drive market movements.
Further complicating this operating landscape, fund managers often face consistent pressure to raise new capital. In their pursuit to differentiate and attract new inflows, firms are made to heavily invest in their research processes, which naturally involve significant, sustained investment in financial technology platforms.
“The research ecosystem involves collaboration, communication, and idea generation. These three pillars are very important,” said Andrea Mosconi, Bloomberg’s Global Head of Equity, Research, CMA, and Listed Services Product, during Bloomberg’s Next Generation Research Summit held in London earlier this year. “If you’re an analyst, a portfolio manager, or whatever your role, idea generation will always be a part of the asset allocation and decision-making process,” added Mosconi.
While there’s tremendous pressure to invest in research, Mosconi stresses the importance of firm-level efficiency and the need to create cross-team research synergies. Consequently, delivering successful investment ideas depends on managing complexity and consistently outthinking the market, all while never losing sight of process efficiency.
Investment challenges and trends
How should investment firms proceed in such volatile market conditions? How can managers best make repeatable investment decisions under budget constraints? How can sustainable best practices in their research departments be implemented?
To help guide investment firms finding these answers, we’ve summarized four emerging trends and their implications for performing investment research in today’s market environment.
Trend #1: Durable growth of investment teams
Surveys point to growth of the investment analyst population driven by industry changes, budget allocation decisions, and the emergence of new analyst types, such as ESG analysts and Quants. Further, according to research by Coalition Greenwich, 73% of firms responded they expect fundamental analysts to be a priority investment area as they expand in-house research capabilities.
Trend #2: There’s no shortage of data, but it’s getting harder to gather and analyze efficiently
Investment strategies are becoming more sophisticated, more global, and more cross-asset. The availability of new datasets and the growth of allocation to ESG and quantitative strategies are increasing the need for new kinds of analysts. As complexity grows due to information overload, funds and their managers need technology support to stay informed.
Trend #3: AI and ML capabilities improve efficiency while helping to both generate and protect intellectual property
Investment teams often must operate in a world of conflicting forces. This has created a growing need for platforms that can manage and drive automation and consistency of data. Intended goals can often range from saving time on administrative tasks to ensuring intellectual property is retained when investment personnel leave the firm. Artificial intelligence (AI) and machine learning (ML) technology have begun revolutionizing how institutional investors conduct and manage their research. By fundamentally transforming how an investment research team operates, funds can increase productivity and find fresh alpha-generating ideas through the implementation of AI and NLP driven search, analytics, and research management capabilities. Bloomberg’s Research Management Solution is the only fully integrated platform covering every stage of the research process.
Trend #4: Profitability depends on cutting-edge investment research
In the pursuit of alpha generation within an incredibly competitive industry, asset managers must first establish then maintain a differentiated investment process. While there are many ways for firms to stand out in the crowd, a scalable and robust research process is critical to generating returns. This drives and supports their efforts to attract and retain capital. A commitment to technological innovation has become a must have. When efforts are underpinned by the right technology solution, asset managers can more effectively raise capital, increase firm efficiency, and maximize their opportunities to uncover actionable insights.
Technology is the key to efficiency, competitiveness, and profitability
From our discussions with the investment community, it’s clear that the requirements of their research process are becoming increasingly more complex and their industry more competitive. It’s also clear that technology is a key differentiating factor separating efficient and profitable funds from their competition. As a result, institutional investors must have a technology platform that is customized and can dynamically support needs. These include contemporaneously surfacing key market intelligence and insights to stay one step ahead.
Asset managers are finding they must commit to technological innovation to both differentiate from their competitors and to increase their ability to generate risk adjusted returns for their funds’ investors. This includes new considerations and requirements on how to best leverage AI and ML capabilities in their research management process. It is crucial to select the right platform which can automate administrative tasks, connect and integrate departments, and facilitate collaboration across front office investment teams. Bloomberg builds leading-edge research solutions in support of these four core needs, purpose-built for today’s modern front-office investment professionals. Learn more by registering for our upcoming webinar series.
Asset managers must therefore commit to technological innovation to both stay ahead of competitors and create alpha for their clients. This now requires leveraging AI driven research capabilities and investing in research management platforms that automate administrative tasks and facilitate collaboration across teams.
Bloomberg builds leading-edge research solutions in support of these four core needs, purpose-built and customized to the needs of today’s modern front-office investment professionals. Learn more by registering for our upcoming webinar series.