Evan Schnidman, Arbor Advisory Group Technology Advisor, recently co-authored a paper, titled Distribution is Not Enough, on the rise in importance of proprietary data and analytics technologies for the modern investing market.
One of the most important points of the paper is that the disproportionately higher number of potential data buyers compared to data sellers, especially for fundamental data, will create a land grab for data assets and technologies that can produce proprietary data assets.
To attract AUM in the modern investing market, firms will have to offer investors unique insights, possible only from proprietary data, advanced analytics, or some combination of the two. This is crucial knowledge for our clients in the investor relations industry as it pertains directly to the activity of the shareholder community moving forward.
The financial services industry is in the process of mass consolidation. Asset management fee structures have collapsed, forcing many large asset managers to consolidate in order to maximize operational efficiencies associated with scale. However, consolidation in the supporting data and analytics industry has received far less attention. We contend that consolidation in the data and analytics industry will accelerate as more firms recognize the need to own underlying data assets to derive and deliver unique insights.
In a market flush with unproven data and noisy signals, institutional grade unique insights have never been more valuable. The democratization of investment technologies means that investors are now leveraging these insights to craft custom investment strategies. While this trend is accelerating, the verdict is still out regarding many data vendors’ ability to derive unique insights and monetize their data assets. This paper identifies several companies that are well positioned to derive unique insights, making them the likely winners in the modern data-driven financial services market.