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Investors need to reimagine workflows

Investors need to reimagine workflows 41

By Keith Bortoluzzi, CEO, Thread

For centuries, getting the right information to make sound financial decisions and investment thesis was a major challenge. For example, insurance premiums, first developed in the 14th century, were originally priced intuitively due to the fact that no data existed on risk.

Similarly, traders on the Amsterdam Stock Exchange, established in 1602 and the first of its kind, would glean information through conversations with peers or merchants. Short-term speculative trading was the norm in this environment and little energy was put into proof-checking the data or information that was being used.

During most of the 20th century, investment professionals have spent huge amounts of time reviewing company reports and newspapers in order to find the most useful information. As time progressed the problem of data scarcity was replaced with data overload, but even with more information, the analysis part of the process was often no better than our 14th century insurers, limited to educated guesses from individuals working in silos.

The digital revolution

Technology has, of course, revolutionised the way we access and use information. Starting in the 1990s, affordable personal computers and spreadsheet software such as Excel enabled individual investment managers to harvest large datasets and derive insights from them.

The democratization of the internet meant that data like financial ratios, rankings, and other financial information became commodities.

As access to data improved, investors dedicated increasingly more time and money to analysis in the hope that acquiring a greater volume of insights would translate into higher portfolio performance. Investors now spend the majority of their time working on upstream, namely collection of data, and midstream, the deriving of actionable insights from data, processes, investing in faster computers and more sophisticated analytical techniques to improve their informational advantage – but is this resulting in better outcomes?

Although our human brains are pretty exceptional when it comes to absorbing and processing information, the sheer volume and complexity of data which investors have access to makes it impossible for them to handle in isolation. Investors require tools which help them collect data, decide on the most relevant information and turn this insight into actionable investment decisions.

Keith Bortoluzzi

Keith Bortoluzzi

Next-generation productivity tools

Covid-19 has highlighted fundamental problems with first-generation productivity tools used by Asset Managers, many of which are designed for single users but are not well suited to entire teams.

To be truly productive in today’s interconnected but physically-remote world, investment teams need a new approach to digital collaboration. A next-generation technology which enables them to share and discuss ideas in real time, as well as retain learnings for the good of the whole team and wider business.

We know that Asset Managers derive their best and most original investment ideas from the collective knowledge of specialists within their organization, such as industry experts, bonds, or equity analysts. Cross-industry expertise and collaboration are often required to crack the most complex investment opportunities.

Traditionally, investment teams have relied on different files, tools, and methodologies to source, build or update investment theses. The ability to share information and collaborate on ideas has often been based on the back-and-forth, informal communication between team members. Our own experience of working with investment teams which use first-generation tools shows it is also very common to see separate teams reviewing the same information several times instead of capitalizing on each other’s work because they don’t have the right tools to collaborate and properly split their workflow.

Capitalizing on collective knowledge

To ensure they are using the expertise and insights they have access to, investors need a digital workspace where all relevant information and people are gathered in one place to create, discuss, and challenge investment ideas. Technology can now recreate those in-person discussions which are so essential to good investment thesis, while also creating a central repository for insights and conversations so Asset Managers don’t have to ‘reinvent the wheel’ each time.

This should include such features as real-time editing and commenting on investment notes, a centralized and shared views build so that teams can tap into a ‘single source of truth’, access to company restatements and estimates made by your colleagues, and the ability to edit estimates directly within a shared table which removes the hassle of copying and sharing Excel sheets with teams as a way to share knowledge.

If one positive can come out of the Covid-19 crisis, it is the acceleration of digital, the chance to reimagine the way we work and find tools which better fit our needs. Innovation usually takes iterative steps towards a final revolutionary product that changes the world, but the current crisis as a unique opportunity to break down silos and make a big leap into collaborative, next-generation investment technology.

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