Grant Watson, a boutique lead at Old Mutual Investment Group says that the emergence of a low return world continues to challenge investors in their search for yield.
Within a local context, he said that growth assets in particular are struggling.
This environment is shaping the rise of a number of industry disruptors within the asset managers, which is forcing the industry to rethink its investment approach and product offerings.
Watson opined that this disruption presents an opportunity for more forward thinking investors to adapt their investment approach to enable them to capitalise on the changing landscape.
One such disruptor, he said, is the progressive use of data analysis as a factor-based investment tool.
“Given the deluge of data that today’s investors are faced with, there is an increasing need for filtering tools. This is essentially what machine-readable news – a quantitative tool developed and used in one of our Funds – was designed for,” he explained.
“The world is moving into a hugely tech-driven age, but in an era of information overload, the combination of technology with human judgement will prove to be the most powerful investment tool of the future.”
He added that that while the world is moving at a rapid technological pace, the investment industry has, to some extent, lagged behind. The rise of fake news, for example, has started to influence the markets.
“In the realm of investing, however, whether information is based on fact or fiction is less of a concern, as the real value exists in an investor’s ability to objectively read the market sentiment that an incessant ream of information is inciting,” he said.
The model enables the analysis of large amounts of data, offering insight into market sentiment to anticipate the behaviour of the ‘herd’.
“By blending human analysis with mechanical objectivity, the model enables us to assess how any behavioural biases can be exploited,” said Watson.