Asset managers are divided about using data from advisers to influence their investment decisions, despite the Financial Conduct Authority recently praising carrying those firms which carry out analysis in “smarter ways”.
Last month, the regulator published a report which examined how asset managers look at information from their fund distributors, such as financial advisers, to meet investors’ expectations.
Five firms of the firms it looked at were investing in “smarter ways” to analyse data from their distributors to better understand the types of customers investing in their funds.
However, fund managers and distributors have questioned whether the accumulation of data actually makes fund houses more intelligent, with some suggesting it might result in trend-following instead.
James Budden, director of marketing and distribution at Baillie Gifford, said firms must understand their customers and look to “suitably satisfy their needs”, though he questioned whether current techniques, such as customer profiling, produce the best outcomes for investors.
Firms “must be honest with themselves” and avoid the temptation to raise assets by launching funds just because they are currently popular.
David Coombs, manager of the Rathbone multi-asset portfolios, prefers to trust his own instincts rather than use a third party to influence investment decisions.
“There are lots of smart people and there are lots of smart people who sometimes get things wrong, and I’m not smart enough to know when the smart people are wrong. There is too much noise.”
Mr Coombs said he has to anticipate where consensus is sometimes, but would “neither follow the herd nor stand in front of it”.
Trevor Greetham, Royal London Asset Management’s head of the multi-asset, said communicating with advisers was important when designing his new range of ‘GMap’ portfolios.
“I have a lot of dialogue with financial advisers, investors, policy makers and market strategists on an ongoing basis, so the interactions with financial advisers and others can help inform your own market views.”
Meanwhile, Goldman Sachs Asset Management’s head of international third party distribution Nick Phillips described his firm as a “big data driven investor”.
He said each year Goldman Sachs’ analyses 26 million news articles, one million research analyst reports and 288,000 earnings call transcripts, adding investor sentiment is “enormously important” when choosing where to allocate money.
Darius McDermott, managing director of Chelsea Financial Services, said: “Some fund managers follow the trend, but if you are going to follow a trend you have got to have expertise to do it.”
“There is no point in launching a fund you are not going to sell, but trends deal with what has been sold historically rather than in the future. The fund management industry is a nifty industry and some are clever and see a gap in the market.”