Why qualitative data is the future of thematic investing

As an asset manager, one of the biggest opportunities you have to differentiate yourself in today’s hyper-competitive market is to offer your clients thematic investment options.

As this Factset and Forbes report on investor appetite shows, investors are practically chomping at the bit to invest in the various macroeconomic megatrends that are reshaping our world.

Unfortunately, many asset managers are currently unable to grasp the thematic opportunity.

And the obstacle is qualitative (aka. ‘unstructured’) data – specifically ingestible, granular and usable qualitative data.

And that’s the rub: the majority of the data insights you need to make the accurate predictions thematic investors are looking for are hidden in unstructured data.

But unstructured data – while being relatively easy to get hold of – is really hard to work with. Especially when it comes to scoring it to make more deeply-informed predictions.

Or at least it has been until very recently.

Let’s look at why that has been the case – and why it no longer needs to be.

The 3 big problems with using unstructured data

In the past, to get insights from unstructured data asset managers have generally had to pay someone (or more likely, a whole team of someones) to manually gather and analyse it.

And like any manual process, it consumes heaped platefuls of time and resources and is liable to be undermined by human error.

But things are even worse than that – because even if you can afford to invest in the manual process of unstructured data analysis, that process doesn’t necessarily produce results that can be used as you need them to be.

That’s because of the nature of unstructured data, which creates three big problems.

• Problem 1: Sheer volume

The first problematic thing about unstructured data is that there’s a lot of it.

Actually, there’s a lot more than a lot of it. Most data (some say upwards of 90% of it) is unstructured. Research firm ITC predicts that there’ll be 175 billion terabytes of unstructured data by 2025.*

This means that even the most psychotically caffeinated team of experts is liable to miss some vital pieces of thematic evidence when sifting through the towering data-pile.

And there’s no way of telling what they might have missed.

• Problem 2: Questionable quality

Making matters worse, qualitative data itself varies wildly in quality.

Everything from an article in a reputable news outlet to a Facebook status update counts as unstructured data. All of it – from the most reputable article to the sketchiest tweet – is riddled with subjective biases, and none of it can be entirely ignored.

There’s no getting around it: you need to weigh the importance of all of these different sources and signals. Which is, given the aforementioned volume issue, fiendishly difficult.

As is precisely identifying what events do and don’t critically affect thematic trends and investor exposure.

• Problem 3: Fuzzy insights

Because of the sheer volume and inconsistency of unstructured data, manually collecting and analysing it inevitably produces incomplete, fuzzy and not entirely trustworthy datasets.

These datasets are hard to derive valuable insights from. And even if you can derive insights from them, it could take days – if not weeks – to surface them.

That’s a problem when effective thematic investing demands a far more nuanced, low latency and consistently usable flow of unstructured data.

And because they’re so fuzzy, these unstructured datasets can’t be integrated and correlated with either your fundamental and quantitative datasets.

This holds you back from seeing thematic trends straight and making more incisive predictions based on that knowledge.

So far, so bad, you might think. But now here’s the good news (we told you it was coming.)

How our platform makes unstructured data usable

Thanks to our AI-enhanced Thematic Intelligence platform Affinity, you can now solve all the problems unstructured data has historically caused asset managers.

Unstructured data can now be made as accurate, timely and actionable as structured and fundamental data – and can be integrated with it.

And the base metal of raw, unstructured data can at long last be transformed into asset-management-friendly thematic gold.

Here (in brief) is how that works…

Affinity leverages Natural Language Processing and Deep Learning to collect, distill and analyse vast quantities of unstructured data at machine speed.

(There goes the volume problem…)

Armed with our platform’s formidable AI brain, asset managers can easily interrogate unstructured data according to industry themes, uncover hidden signals and identify critical events that even the most expert humans can’t spot.

Crucially, Affinity has a scoring engine (ThemeScore), which makes it simple to sort the unstructured wheat from the unstructured chaff – and in turn to rank portfolio exposure and new opportunities.

(So much for the quality problem…)

As well as identifying these themes, signals and events, our platform automatically maps them onto entities – e.g. companies and people – to derive (ThemeScore weighted) insights that can help guide thematic predictions.

These insights are all pulled together and surfaced via ThemeGraph, an insights hub. With ThemeGraph to point you the way, you can act on deep insights (not found on typical terminal products) in the timely fashion thematic investment demands.

Finally, and by no means leastly, you can integrate these insights with zero concern into your fundamental and structured datasets, powering even more accurate predictive thematic insights.

(Goodbye fuzzy insights – it wasn’t nice knowing you!)

So there you have it. Unstructured data problem(s) solved.

Your move.

We’ve figured out how to de-thorn the unstructured data nettle.

Now it’s up to asset managers to remove their gloves and grasp it.

Time is of the essence. The thematic opportunity is growing every day; but the window for establishing yourself as a differentiated leader in this area is shrinking just as fast.

Our Affinity platform could be exactly what you need to create the unique, granular and customised thematic investment products investors are clamouring for – and establish a lead for yourself before it’s too late.

So head to our Affinity page now to learn more about how you can tap into the power of Thematic Insights, over and over again.