Fund managers invest in the team
Funds management groups are increasingly adopting a team approach to the investment process rather than focusing on one star fund managers, according to State Street Global Advisers (SSgA) Advanced Research Centre director Anthony Foley.
"This process can no longer work because one person can't have all the answers and be up to speed with all the techniques used to source them," Foley says.
Foley heads up the Advanced Research Centre (ARC) which was created by SsgA three years ago to conduct intensive research into investments using techniques from outside the managed funds industry.
Foley says the group has taken elements from research techniques in fields as diverse as biotechnology and artificial intelligence. At the same time, it also uses staff drawn from backgrounds such as astrophysics and engineering.
"We do not actively manage any money within the ARC but are rather concerned with getting the best possible research results," Foley says.
"We are very aware that we, as an organisation, are entrusted with large sums of other people's money and so we need to have the best processes."
Foley says the group has adopted a model which does not aim to make a single person a quantitative research genius but rather the model gathers, filters and implements the best ideas into the group's investment portfolios.
"We want to test ideas from outside financial services to find the extreme stocks, the rockets and the torpedoes, and that means we don't forecast straight returns but also look at longer term probabilities," Foley says.
He says the push to this type of enhanced research has been due to the global growth of investments as well as the growing level of education among investors.
"Worldwide, investors' familiarity with funds is increasing and this means there must be a change in attitude to how investments are structured for success," Foley says.
"Through the ARC, we are trying to emphasis that the industry has moved on and are we aware of the limitations of investing and how hard it can actually be, and looking at ways of moving beyond that."
AUTHOR
Jason Spits
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