The investment research landscape has drastically changed in recent years and the industry has had to storm through quite a few headwinds. Falling profits at the world’s biggest investment banks, coupled with stricter rules and regulations, have forced the largest investment banks to cut analyst jobs en masse.
Thousands of weekly emailed reports by sell side analysts and strategists are being left unopened at the asset managers who have grown increasingly picky with what they want to read and how much they would spend on investment research.
The Challenges in the Global Investment Research Business
Apart from cost cuts at both investment banks for analyst jobs and at asset managers’ budgets for investment research, content is often duplicated, while offering and distribution is being done statically via emailed daily or weekly reports on corporate financials, profit expectations, or market, industry and country insights. Therefore, it’s not surprising that as few as 2 to 5 percent of research emails are read each week, the Financial Times reports, quoting industry insiders.
On top of these industry headaches, a new EU regulation – set for coming into force on January 3, 2018 – will be obliging asset managers to pay for research directly, rather than via trading commissions or awarding business to those investment banks whose analysts they like. Although it’s EU-only regulation, expectations are that it would have a wide-ranging impact on the way the global research industry and fund managers do business.
So, the logical questions these challenges pose are: What’s next for the investment research industry and who’s winning in this seemingly doom-and-gloom scenario?
The Solution – Semantic Technology
While the biggest investment banks will be trying to put a price tag on their research services and will seek, as always, to maximize profits, independent research firms are using cutting-edge technologies to stand out from the crowd, add value to research pieces, and efficiently parse and monetize the content they offer.
BCA Research, a standalone investment research group not affiliated with any major investment bank, is creating and selling research products based on semantic technology. The group is offering BCA Edge – a platform that is closer to a digital publishing solution and takes investment research to the next level with personalized content and insights. BCA Edge is disrupting the usual static distribution pattern of sending out thousands of lengthy emailed research reports, most of which would never get opened.
BCA Edge was developed on top of Ontotext’s Dynamic Semantic Publishing, Concept Extraction and GraphDB. The information model and text analytics behind it cover important concepts of markets, market conditions, the economist’s view on the development of macroeconomic trends, and suggested trades or investment portfolio re-allocations over a certain time period (horizon).
The Ontotext-backed technology drew industry-wide attention and BCA Research won two awards in December 2015, for ‘Best Innovative Technology Solution for Small Firms’ at the 2015 HFM European Technology Awards and ‘Most Innovative Financial Services Solution’ award at the 2015 bba/ifs Financial Innovation Awards.
Semantics Matter – The Novel Approach To Delivering Investment Research
BCA Edge is capable of providing deconstructed content and offering customers the opportunity to find related, popular and suggested content. The investment research platform also enables semantic search for content and visual representation of relationships between themes, views, trades, charts and reports.
Bashar al-Rehany, the chief executive of BCA Research in Canada, told the Financial Times:
“I don’t want to end up like Kodak,” referring to how that company failed to predict the rise of digital photography and how it disrupted and upended the traditional business of taking and developing photographs.
Brijesh Malkan, who leads the BCA Edge project, described the approach to delivering research reports for the Financial Times:
We break down the report into individual Lego blocks, so people can get what they want, and can build it up in the way that fits their consumption pattern.
Customers who have migrated to the platform have been consuming up to 30 percent more of BCA’s research, proving that this approach is working in providing leaner and fitter content tailored to the specific interests and needs of the clients.
So, demand for investment research will not go away and investors will still need it. But the content, production, representation, and delivery will dramatically change with stricter regulations and tighter budgets.
The winners in the new-age investment research business will be those capable of offering attractive dynamic content that would make them stand out from the hundreds of emailed reports. The winners will be the ones who are breaking down content into individual Lego blocks – to use Mr. Malkan’s analogy – and allowing clients to build houses fitted exactly to their needs out of these blocks.
Semantic technology is the core technology for helping independent research providers integrate data from disparate sources, efficiently re-purpose content and combine it with traditional analysis or statistics. It enables them to get exactly what they need, answering their most pressing questions and allowing them to take faster investment decisions based on a wider, fuller, 360° view of investment analysis.
To learn more about one of Ontotext’s cutting-edge technology on top of which BCA Edge was developed, join Jem Rayfield, Ontotext’s Chief Solutions Architect, in his upcoming webinar Smarter Content with a Dynamic Semantic Publishing Platform. He will share DSP implementation insights, platform evolution plans and integration options within your IT ecosystem.