Data Analytics Tools for Fundamental Investing

We incorporate data analytics and automation tools into the Fundamental Investing process to increase analyst productivity and increase the range of data that analysts can utilize in making investment decisions.

​

Some of the solutions that we have used include:

• Web-scraping to collect publicly-available data for analysis.

• Data analytics and visualization tools to process alternative data.

• Automation tools to automate repetitive tasks that used to be done manually be investment analysts.

​

Fundamental investing is often based on 'Investment Themes' or 'Stock Ideas' - narratives or stories that are based on some underlying view of the world. Data analytics can help to flesh out these narratives by seeking more and better data to check against these narratives, as well as for monitoring the underlying assumptions upon which these narratives are based.

​

This is the traditional approach to investing.

​

Every investment team is slightly different in their investment analysis workflow. They look for different types of stocks to invest in, analyze different types of data, analyze data in different ways, and come to different conclusions about the data.

​

We work with each team to develop processes that suits their individual needs.

Factor Investing

Factor Investing is an approach to investing that aims to identify specific drivers of stock returns and construct investment portfolios based on these drivers. Unlike Fundamental Investing (as defined above), Factor Investing often begins by looking for drivers of returns and then building an investment narrative around these drivers.

​

Factor Investing has been around for decades. It has become more popular in recent years because of the increasing availability of data analytics tools that can speed up the process of identifying and testing the effectiveness of these factors. As technology continues to improve, it is likely that factor investing will continue to grow in popularity and attention by investment professionals.

​

A serious effort at factor investing often requires the following:

• A data storage infrastructure for storing and retrieving the large amount of data typically involved.

• An analytical methodology to identify the best factors.

• An automated hypothesis testing infrastructure to efficiently test the effectiveness of the factors.

​

There are many data providers in the market who can sell you their own factors and backtest programs, and this may be sufficient for some investment teams. However, if the team wants to develop their own factors and customize the analytical process, they may have to build their own infrastructure.

We work with Clients to develop their ideas on factor investing and to assist in building their infrastructure.

Systematic Investing

Systematic Investing is an investment approach that tries to automate a significant portion of the investment process. The ideas is that this removes the need and scope for human intervention in the investment process, thereby reducing the room for mistakes arising from human biases and emotions.

​

For example, for stock portfolios, the systematic investing often takes the following steps:

• Stock selection

• Position sizing (including setting net exposure, portfolio beta, gross exposure, leverage ratios etc.)

• Trade execution

• Portfolio monitoring (including risk monitoring)

• Risk control (including position adjustments when key risk limits are breached)

• Portfolio exit

​

Systematic Investing is often tied together with Factor Investing, but this is not always the case. As with Factor Investing, the increasing popularity of Systematic Investing is tied to the increasing power and accessibility of automation tools and computing power. In many situations, computer-driver automatic processes (such as in risk control) can outperform manual processes.

​

We work with Clients to develop tools and workflow for systematic investing. Each solution is different because each client has a different need, and each solution is tailor-made for each client.