Portfolio managers in asset management have the most to lose as the buy-side expands its investments in data mining and artificial intelligence. 90,000 jobs are expected to go across the sector, and BlackRock has taken the lead by removing traditional ‘fundamental’ portfolio managers and relying more on robots.
But there will be some winners as asset managers pour more money into new sources of data to gain an edge. Firms are expected to spend more than $7bn on new sources of data by 2020, according to a new report from research firm Opimas. This new data will be everything from satellite imagery of oil reserves or car traffic to footfall outside large department stores to transaction data and social noise around company sentiment.
To handle it all, Opimas says asset managers are going to need an entirely new type of talent.
Firstly, they need ‘data managers’ who can go out and unearth new types of information that will give them an edge over the competition. This is a different skill-set from the current data management job, which is mostly about dealing with aggregators like Bloomberg or Thomson Reuters.
Then there are the data scientists, of course. They will have to create new models to analyse the vast new data sets. The problem is that a lot of the current alternative data sources are unreliable, incomplete – or as one senior data scientist puts it “crap”. This makes statistical analysis difficult, so asset managers need to embrace artificial intelligence aids like neural networks to really seek out patterns.
The final area that asset managers will need to invest is domain expertise, says the report. This does not mean that hedge funds and asset managers are going to need financial service expertise, more people who understand the data sources. For example, you see a bunch of satellite images of crop yields, would you understand what’s in front of you? Probably not. Therefore, strangely enough, the buy-side will have to employ people who understand crop production.
The investment in new staff has the potential to create talent shortage in an area where financial services organisations are struggling to hire anyway. Opimas suggests that a hedge fund with $3bn in assets under management will 80 data scientists if it wants to lead the way in data analysis, and then another 70 people to develop its systems.
So, yes, some traders and portfolio managers are going to fall by the wayside as a result of the new move towards big data. But, suggests Opimas, it’s also a method of empowering them to gain an edge over the competition. Embrace it, or become irrelevant.
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