The Buy-Side Investment Research Process is Professionalizing

But there’s no need for cumbersome systems and stifling controls

It’s quite something that in the world of SEC cybersecurity examinations, broken window policies and increased regulation the majority of funds have no formal systems or tools in place to manage their investment research, and the sensitive data and proprietary IP that goes with it.

Findings from our study with Greenwich Associates reveal just 25% of asset managers and asset owners have a formal research management system in place today.

With operational excellence at the middle and back office taking precedence in recent years, informal approaches to research and data management have been left to, well, tick along. For three-quarters of funds we surveyed, a concoction of hierarchical shared drives, email, consumer note-taking apps are still dominant for managing their investment research process.

But that’s changing. And not just because of the regulators either.

We’ve written about the Professionalization of buy-side research a number of times previously. In short, research is where every investment begins, it’s where your competitive edge is borne, and more and more funds are waking up to the fact that a systematic research process can act as a real competitive differentiator.

Many firms have felt that they can “make do” with informal tools such as spreadsheets and shared drives, yet find these approaches do not enable collaboration and are highly inefficient, relying on manual updates and often lead to data silos, insufficient data capture and higher error rates.
– Kevin McPartland, Head of Research in Greenwich Associates Market Structure and Technology group, excerpt from Research Management Systems: Essential Tools for Modern Investment Management

Now, that’s not to say that these informal approaches don’t get part of the job done – for many, a process of “hacking” together word, excel, evernote, dropbox and shared drives and other combinations thereof – often provides superior usability and productivity benefits than traditional legacy approaches to formal research management has ever done.

And herein lies the dilemma

For too long RMS was restricted by the old way of doing things.

Led by the need for data storage, security, compliance and procedure – legacy Research Management Systems are slow and cumbersome, inflexible and siloed, and largely incompatible with the productivity and performance needs of today’s mobile, tech-savvy investors and analysts.

That’s why, in many funds, analysts simply sought out their own technology alternatives that help them get stuff done. Whether out in the open, or under the radar of portfolio managers and CTOs. Consumer-led software “hacks” may serve to speed up productivity in the short term, but they can also jeopardize fund compliance and security and exacerbate the problem of organizational and information silos.

So while funds need to formalize research management in order to ensure compliance, process control and operational excellence, you also need to do so without restricting the user; the investment professionals that deliver performance.

If you’re still using consumer-cloud apps and non-industry specific tools at your fund, or stuck on legacy platforms that restrict collaboration and productivity, you’re not alone. Check out a summery of our recent report with Greenwich Associates here, entitled: Goodbye Spreadsheets and Shared Drives: New Tools Help Asset Managers Unlock Value from Investment Research and Data, or you can download the Full Insights Report on RMS here.

And, as always,  if you’d like more information on what modern RMS can do for your fund, get in touch!