Asset Management Examples
Despite historic hesitancy on the part of many asset managers, driven in large by regulatory concerns, social networks play an increasingly pivotal role in the industry. Marketing and investment management functions such as idea generation, portfolio monitoring, and trading may attract the most interest, but social media is infiltrating the industry in other ways as well. The following list of established and emerging players is illustrative, but it should not be considered exhaustive.
Investment management companies are increasingly well served by data and analytics firms that reduce the amount of heavy lifting required of internal staff. 7Park Data supplies alternative data and analytics to firms in a number of industries. Its financial services offering considers social data alongside myriad other datasets before generating insights to be used by professional portfolio managers. Rather than offering market intelligence, some firms are opting to sell the tools needed for the job. Accern offers a “no-code development platform”37 for AI workflows, empowering research teams to better analyze social media and blog posts.
Financial services are only one industry vertical of many to some firms, but others prefer to concentrate on a single sector. Alexandria Technology offers analytical tools to institutional investors that aim to make sense of real-time information flows from a variety of textual sources, including tweets and blogs. Sentifi is also focused on professional investors. Their analytics engine is supplied social media feeds alongside other types of unstructured data as well as traditional financial information. Analytical outputs provide context for external events, facilitating idea generation, trades, and portfolio monitoring. The company sets itself apart with a ranked list of 14 million influencers.38
Estimize takes a different approach to a similar idea. Rather than relying on external social media platforms, it was created to serve as a virtual community for asset management professionals, focused on the sharing of financial estimates from analysts and investors. The company has carved out a unique niche for itself by banking on the wisdom of the crowd, and it is expanding its footprint by integrating with established industry data platforms such as Bloomberg.
Mentioned in our 2016 paper, Dataminr uses an AI that understands 80 languages to scour hundreds of millions of publicly available data points each hour to provide early detection of risk factors. Social media feeds comprise a critical input for this process, which informs the risk management efforts of an assortment of blue-chip clients.
Not all firms are focused on specific industry verticals or use cases. DataSift bills itself as “the world’s largest selection of human data sources.”39 A wider than usual array of social media sources figure prominently in their promise to advance analytics. Underscoring the ongoing consolidation of the space, the company was acquired in 2018 by Meltwater, an analytics firm with $235 million in funding and 13 acquisitions since its founding in 2001.40
Another contender in the analytics space, RavenPack expanded their coverage more than five years ago to include social media. At the time, their chief data scientist noted that this move was accompanied by “complex challenges, including the unique language used by microbloggers; the problem of source reputation; issues related to security and abuse of accounts; and, lastly, whether news actually breaks on Twitter versus news sites.”
Lexalytics presents its natural language processing (NLP) as a differentiator, touting its ability to effectively glean meaning from the sometimes-arcane nomenclature of social media, while simultaneously grasping the meaning of posts steeped in financial jargon.
While it is not unusual for analytics firms to integrate social data into their offering, some independent firms are laser-focused on this area. Stocktwits was mentioned in our 2016 Upside of Disruption paper, and it now bills itself as the world’s largest community of investors and traders. With more than two million registered users, the company’s claim to have “reimagined financial media for the next generation”41 does not seem far-fetched. It is a far cry from the days of reading the Wall Street Journal or calling your broker to take the market’s pulse.
They are hardly alone. MarketPsych claims to produce “the global standard in financial sentiment data derived from thousands of news and social media outlets.”42 Highlighting yet another way that data is consumed, the company collaborated with Thomson Reuters to offer indices that track emotions such as fear, optimism, and confusion. Others have struggled, as evidenced by the fact that iSENTIUM went out of business after battling Bloomberg over trade secrets.
Closely tied to sentiment analysis is the business of social investing or mirror trading. Founded in 2006, just a year after the term “crowdsourcing” was coined by two editors at Wired, Covestor was among the first to let investors follow and mimic the portfolios of others based on their investing styles and track records. Since our 2016 paper was released, Covestor has been acquired by Interactive Brokers Group.
Other social investing platforms, such as Open Folio, Tip’d Off, Stocktwits, and eToro, compete for market share, relying in part on the concept’s appeal to millennials. ZuluTrade alone has 10,000 traders (aka signal providers) from 192 countries and offers access to a wide assortment of asset classes including stocks, commodities, forex, and cryptocurrencies. Ayondo and Tradeo are further examples of social trading platforms. With the social investing model established, some companies are trying to evolve it. Darwinex positions itself as an investment manager with packaged products called “darwins,” which serve to limit transparency, allowing traders to better protect their intellectual property.
Robinhood was one of the biggest finance stories of 2020, generating countless anecdotes about the adventures of millennials—armed with stimulus checks and little in the way of alternative entertainment—trading stocks and options for the first time in their lives. The DIY approach is appealing to young investors used to being able to quickly find answers online. As a result, the advice traditionally supplied by experienced advisors sporting recognized credentials has been supplanted by something more akin to a traditional bazaar, with hyperactive conversations on Slack channels and TikTok videos produced by college students. This is fertile territory for influencers whose track records may be less than fully transparent.
Cheap trades are attracting new investors in other markets as well. Bux is offering commission-free trades to its users in Europe and sports a simple and appealing interface that moves investing even closer to a truly gamified environment. We touched on gamification in 2016 and there have been some tentative moves in that direction, but it still feels ripe for development.
Most firms establish a social media presence for marketing purposes. Building and nurturing that presence can be challenging, but it helps that feedback is easily available. Helping companies monitor their progress include firms such as Mention, a cloudbased social media–monitoring platform that helps clients analyze their brand presence on Twitter and Facebook.
Dealogic, well known for its integrated suite of products for financial professionals, has been active in this area as well. In 2019, the company acquired Selerity, which promises customized content and workflow automation that result in a more engagement and greater client satisfaction.Read Next Section
The Investment Manager Services division is an internal business unit of SEI Investments Company. This information is provided for education purposes only and is not intended to provide legal or investment advice. SEI does not claim responsibility for the accuracy or reliability of the data provided. Information provided by SEI Global Services, Inc.