Traders Magazine | The Data Deluge: What Investors Need to Know to Stay Ahead of the Curve

This article was originally published by Traders Magazine, view the full piece here.

By Tony McManus, Global Head of Bloomberg’s Enterprise Data Business

Today’s institutional investors are steadily becoming much more data driven and quantitative in their investment management strategies. The combination of infinite computing power, data-friendly programming languages, machine learning tools, advances in AI and easy access to financial analytics have collectively reduced barriers to entry and unlocked an abundance of new data sources. Even more traditional fundamental investors are implementing quantitative techniques — a practice the industry has dubbed “quantamental” investing.

For example, fundamental investors demand even longer histories now to ensure their signals are adaptive to different market regimes or sudden shocks, like those we’ve seen in the last couple of years. They are also looking beyond narrow company-level data into big picture macro indicators, as well as signals from the options and credit markets, to understand how companies they hold will be impacted.

Many segments of the financial services industry also face intense competition and cost pressure and are looking to recent advances in AI technology to enable more efficient, cost-effective services. To benefit from the use of AI, investors need a large volume of machine readable, high-quality data with rich history and that data needs to be easily accessible.

But in a world where data is more ubiquitous and accessible than ever before, investors face the dual challenge of managing the overwhelming volume and finding ways to derive a material competitive advantage. Markets are non-stationary, with changing drivers — exemplified by major concerns and influences today such as inflation, fears of recession and deterioration of credit conditions. Asset class and factor returns are also cyclical and time-varying, and past effective signals by nature are subject to performance decay. Each of these factors contributes to investors’ perpetual need for fresher, more granular data. And while each investor’s approach and priorities are unique, the ongoing hunt for differentiated, value-adding data presents similar challenges across the industry.

View the full article here.