| The Investment Research Process – Time for Automation? |
They
are not particularly inclined to give away proprietary secrets by having
their process scrutinized by an IT business analyst. And they certainly
are not willing to be forced into a standard workflow to accommodate a
new system.
However, the times are changing and the research analyst is ready to open their door and let some technology in. For a variety of reasons, Cutter is beginning to see a renewed interest in strategic technology associated with the investment research function.
 |
 Tools
for harnessing more information sources. Have you ever
been in a research analyst’s office? Their desks are typically
piled high with annual reports, broker research, notes, etc.
(A bit of a contrast from the trader’s multi-screen paperless
desktop.) In addition to all of this paper, the analyst also
receives huge amounts of electronic information – market
data feeds, financial databases, broker emails, company announcements,
and the like. What’s a bit different now, is that the analyst
also has an incredible amount of information available to them
on the Web, if they know how to find it. Between news sites,
subscriptions, blogs, etc. there is an ever-growing number of
information sources available.
There are a number of web search tools focused on the investment management space that go beyond a basic Google search and use sophisticated semantic technologies to seek out meaning in unstructured web content. These vendors pride themselves on their ability to find new information and ideas that bring an edge to a particular analyst. Another type of application being promoted to help the analyst manage their workflow is the research management system (RMS). These applications assist with managing incoming email and news feeds. They track all types of research information and make it easier for the analyst to find the important content. These tools are primarily being installed at hedge funds, but there is increased interest in them from traditional investment management shops. |
|
Fewer sell-side analysts. We’ve all heard about the decrease in sell-side research budgets associated with regulations requiring the separation of research from investment banking functions. The reality is that the sell-side can no longer afford to subsidize the cost of providing buy-side research and is cutting back on their analyst staff. To the buy-side, this means they must take on the research function themselves or find alternative sources. Again the research management system goes a long way toward managing available content, some even providing links to independent research provider (IRP) networks. |
|
 Assessing
the value of research. With the increased unbundling
of trade execution from research costs, buy-side managers are
looking for ways to assess the value of external and internal
research. Firms are struggling with defining the appropriate
methods for valuation since historically most broker voting has
been fairly subjective. Software vendors are offering tools that
allow managers to define their evaluation criteria and measure
brokers against it. There are also some specialist providers
that conduct their own evaluations of third party research and
offer related consulting to the buy-side. |
A strategic approach for a strategic asset
Many investment management firms have discovered that email folders and shared network drives no longer suffice when it comes to maintaining their proprietary research information. They are looking for a more strategic approach to managing this vital asset. There is no shortage of technology tools to support all or part of the research process, from idea generation to report production to broker evaluation. The agile investment manager will consider how these tools fit strategically into their operation and put them to good use.
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| May 2008 • Issue 58 |
| Upcoming Events | |
| May 2008 | |
| Risk Management Challenges |
May 15 CutterCast |
| Member Dinner The Capital Club The Technology Council™ |
May 19 London |
| Research Management Systems & Practices and Supporting Hedge Funds & Alternative Investments The Technology Council™ |
May 20 London |
| Research Management Systems & Practices and Supporting Hedge Funds & Alternative Investments The Technology Forum™ |
May 20 London |
| Member- Selected Topic Executive Roundtable™ |
May 22 London |
| June 2008 | |
| Member Dinner The Terrace Club The Technology Council™ |
June 2 New York |
| Research Management Systems & Practices and Supporting Hedge Funds & Alternative Investments The Technology Council™ |
June 2 New York |
| Research Management Systems & Practices and Supporting Hedge Funds & Alternative Investments The Technology Council™ |
June 5 San Francisco |
| OMS Users: Latent Zero |
June 19 CutterCast |
| CutterBenchmarking™ and CutterMetrics™ 2008 Topics |
| • | Investment Risk Management New in 2008 |
| • | Supporting Alternative Investments |
| • | Outsourcing |
| • | Data Management |
| • | Portfolio Management Platforms & Processing |
| • | Performance Measurement and Attribution |
| • | IT Operations Spending Priorities |
| • | Derivatives Management |
| • | Compliance |