Fixed income products are seeing a surge of interest due to uncertainty in other financial markets and in response to funding programmes set up by governments to mitigate problems created by the global health crisis. Investment decisions are critical, so how can financial research be optimised to offer the best results? Rowland Park and Simon Gregory, co-founders of financial research technology company, Limeglass, look at some of the issues.
The scenario of government bonds with negative yields and huge bond-buying programmes by central banks to alleviate the economic stresses caused by the COVID-19 pandemic was not a likely situation a few months ago. Yet, financial authorities are now devising a raft of measures to help global economies remain liquid and businesses to remain operational.
In such volatile markets, the need for banks and investors to access appropriate information to generate a positive outcome is heightened. Everything from the latest news on a possible COVID-19 vaccine to the continued trade tensions between China and the US are impacting markets. Consequently, the ability to find and assimilate information on a broad range of topics is hugely valuable. For example, clients may want to understand both the impact of coronavirus on a specific country and that country’s new emergency monetary policies.
Yet is it always possible to quickly identify this information in your body of research?
The quality of content that financial researchers produce is incredibly high and the value of their insights to traders is significant. However, with budgets under significant pressure and research costs being separated from trading, report providers are having to work harder and smarter to demonstrate their value.
One of the key challenges is that research users often have difficulty locating all the relevant insights within the huge quantities of reports produced. This is the usual problem of information overload that every market participant suffers from. In the fixed income markets, where bonds are affected by a wide range of macro and micro factors, the problem is particularly acute. There are no easy ‘tickers’ for companies to identify these factors.
Banks produce and receive thousands of pages of research each day on everything from the global economy to political statements and share prices. This overwhelming mass of documentation can mean that key information and specific insights are not spotted.
Traditional methods of managing the influx of research, such as scrolling through an email inbox or using the ‘Control+F’ search function, are slow and only provide results that match exactly to the search term. Anything using a synonym or related phrase will be missed entirely.
This ineffective use of research represents a systematic loss of value for investors. To remedy this, research producers must maximise their output by enabling their clients to access specific, relevant details quickly. By applying technology to research reports, producers can provide a far more personalised, effective and valuable product.