Big data has been changing the asset management industry already, but its true impact hasn’t hit yet, Barron’s writes.
New Tools for Better Alpha
Data science has already spurred the three main aspects redefining the industry: robo advice, sustainable investing and factor investing, according to the publication.
But where big data will really make a difference is in how active managers harness it to develop new tools to differentiate themselves, wrote Dan Fannon, a Jefferies equity analyst, according to Barron’s.
And they’ll need it, the publication writes. Among large-cap stock fund managers, 88% fell short of benchmarks, while 97% of small-cap managers have been falling behind, according to SPIVA data cited by Barron’s.
According to Fannon, certain new sources of big data — namely, credit card transactions mining — will drive the alpha differentiation in the future, the publication writes. Data mining is already on the rise, he tells Barron’s: assets held in quant hedge funds have more than doubled since 2013 to $900 billion, according to the publication. During the same period, assets held in other hedge fund strategies have slipped from $2.2 trillion to $2.1 trillion, Barron’s writes. According to Fannon, as more traditional asset managers accept big data for their approach, the industry will roll out a whole new set of products in the next decade, the publication writes.
Commentary on Barron’s article by Crystal Kim
Posted by: The Wealth Advisor
