Traditional asset managers are snapping up data and incorporating it into their investment processes, but may be struggling to tell what works and what doesn’t, according to a survey released Tuesday.
In turn, that appears to be fueling interest in data science and related tools that can help asset managers figure that out.
The survey of 300 global asset management firms, conducted for Northern Trust by WBR Insights, found that active managers were now leveraging between five and eight data sources. This comes as the number of data sources has increased sharply in recent years.
Historically, insitutional portfolio managers have had an information advantage, but now it’s almost as if they have too much information to synthesize, said Marc Mallett, director of strategy for asset servicing, Americas, at Northern Trust, in an interview.
The survey found that 98% of asset managers were 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. And 68% of those surveyed said they expected to spend the same or more on data science and data in the next two years.
Most managers see the growing amount of information and data as a net good, “however, there is a struggle to identify the information from the noise,” Mallett said. On the plus side, the managers are benefiting from the “democratization of the tools necessary to cut through the noise,” with cloud-based solutions and other advancements making such tools more widely available.
The survey collected responses from 300 chief executive officers, chief information officers, and chief data officers from firms with assets under management of $ 1 billion to $750 billion and hedge-fund managers with assets of $250 million to $10 billion.
Among the highlights, it found:
66% of respondents said they currently leverage five to eight sources of investment data, with ESG (environmental, social and governance) data (59%) and traditional factor data (55%) getting top priority, though alternative, consumer and sentiment data was increasingly tapped in the search for new sources of alpha returns
52% said their organizations still used spreadsheets to aggregate internal and fundamental data; other data sources were accessed manually (email, PDF, etc.) and integrated to make investment decisions.
52% said “making their best investment ideas repeatable” was the investment process that could most benefit from data analytics.