Fintech and impeccable data combine to meet analytics demand of investment professionals

By Brenda Tsai | 13 December 2016

In the popular and political press, 2016 is sometimes and facetiously referred to as the year in which “facts don’t matter”. But in the world of financial technology and investment management, of course, facts do matter. The demand by investment professionals for superior analytics, service, content, and technology has never been greater. This trend will continue into 2017 for years to come.

A survey of more than 400 US and European executives conducted by the Economist Intelligence Unit and Cognizant in late 2015 forecast that by 2018 digital competencies like analytics will be the most sought after skill sets for new hires, while another survey found that nearly half of marketing managers in the US said the top challenge to reach key goals was lack of access to more advanced analytics and insight to make smarter decisions.

As a financial technology firm, FactSet has been challenged to meet this growing demand for analytics for nearly three decades and our work is never finished. Beginning in the 1980s, we were the first financial technology company to move from paper to mainframe processing; the first to export data into spreadsheets; and the first to implement screening engines to search the entire universe of equity products in the markets.

In 2015 we acquired Portware, a complementary and highly innovative fintech firm that offers keen insight into the trading ecosystem, enabling Factset to provide a world-class, multi-asset global analytics solution. Today we employ more than 1,200 global engineers who work towards elegant, high-performance solutions servicing institutional, advisory, plan sponsor and sell-side firms. And with an eye on the future we are investing in new technologies like artificial intelligence and machine learning.

But financial technology is only part of the story. In order to provide superior analytic services, we must have impeccable, thoroughly accurate data and content. In 2001, FactSet began creating our own original content to supplement the expansive third party content available through our platforms. Today we are a multi-asset class and content machine, with more than 4,000 “FactSetters” building out unique and differentiated content sets every day. Our proprietary content includes offerings such as “Geo Rev” that allows professionals to discover investment exposures to specific regions or countries – for example a major economic turning point in Brazil that impacts all of Latin America.

The investment landscape is evolving on a daily basis. Investment professionals are shifting their focus to new and multi-asset class investments in their endless quest to achieve Alpha. Yesterday’s state-of the-art analytics and insight are not sufficient for many professionals to retain a competitive edge. A cautionary tale of complacence can be seen, in hindsight, in the Asia-Pacific markets. For years, especially in China, these markets were fast-developing. Then, in mid-2015, a slowdown set in.

According to a report by McKinsey, banking profits are expected to slow from 10 per cent annually (from 2011 to 2014) to only 3 per cent over the next five years as the traditional banking territory is being disrupted by start-up technology companies who offer financial products and services and by established companies from outside the industry, such as Alibaba. In situations like this, investment professionals need all the research and analytics they can get to assess whether to buy, sell or hold. Understanding market conditions, we have been developing our products and services for clients in the Asia-Pacific region to meet these challenges and be ready for the future.

A prime example of this focus on evolving market conditions is FactSet’s recently announced collaboration with Symphony LLC in the fintech space. Symphony is a consortium of buy- and sell-side firms committed to providing the financial services industry with a vendor-neutral instant messaging platform. Major investors include Goldman Sachs, CitiGroup, Blackrock, UBS, HSBC, Credit Suisse, Deutsche Bank, and Morgan Stanley. FactSet is collaborating with Symphony to offer encrypted data and analytics in order to level the playing field with a vendor neutral chat tool with access to research and analytics on an instantaneous basis.

Perhaps as big as the challenge of achieving alpha for today’s investment managers is keeping them from being overwhelmed by data. Thus there is a constant and growing need for sorting, curating, validating and integrating data into valuable research and analytics. Our clients need help to reduce the cost and administrative burden of supporting data integration and remediation, so we provide in-depth reconciliation and remediation to ensure accurate risk and performance analytics.

Artificial intelligence and machine learning also offer a significant opportunity to simplify the decision-making process and give professionals time to focus on the high-impact, high-value work. Example: Portware developed the first and only “thinking” execution management system (EMS) which helps bring the right information to the trader at the right time, enabling one trader to achieve the same output the same capacity as several traders.

Looking ahead to 2017 and beyond, we see an even broader array of investment instruments and strategies being employed in the global markets. Equity and fixed income are no longer the be-all, end-all investment forums. In a global multi-asset class market, investment professionals have to look beyond all the boundaries of traditional investments to find Alpha. Today, Google has set the standard for how fast users expect every application to be and cloud computing has established the ability to get access to most anything from most anywhere. It’s interesting – shortly after FactSet was founded in 1978, it released its first major product, called “Online" – and it was much like cloud computing decades before Silicon Valley coined the term. 30 years from now it will be interesting to see if what’s old is new again. One thing is certain through – facts will still matter.

By Brenda Tsai, Executive Head of Marketing Communications, FactSet Research Systems

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