Investors using data analysis to beat rivals to deals
Asset owners have been ramping up their spending on data management and predictive analysis in recent years in order to improve returns and win deals – even when bidding less than rivals.
A case in point: a sophisticated Southeast Asian sovereign wealth fund won a bid for a shopping mall last year by offering roughly 80% of the asking price, despite there being a 95% bid on the table. The example was cited by Oliver Johnson, Asia Pacific head of software vendor SimCorp, who declined to provide the institution's name because of client confidentiality.
“Ultimately, the seller felt the sovereign fund would bring a lot more value to the business, given how it had analysed the deal,” Johnson told AsianInvestor.
“The fund [had run] its DCF [discounted cash flow] models on the asset and came up with a price,” he explained. “Then they looked at it slightly differently using alternative data.”
The team analysed credit card spend, consumer sentiment, distribution capabilities and various product lines and found that when all of this was taken into consideration, the revenue projection didn’t quite match the “hockey stick curve” presented by the DCF model, Johnson said.
The fund’s data analysis helped it win the deal while saving money in the process, he noted.
CROSS-PORTFOLIO BENEFITS
Advanced data capabilities can also inform investments elsewhere in the portfolio, said Mark Wightman, asset and wealth management industry leader for Asia Pacific at consultancy EY.
“Let's say you buy listed real estate companies and you own some property. If you have data on the footfall in the properties you invest in, that can be valuable across the rest of your business,” Singapore-based Wightman told AsianInvestor.
“It’s about leveraging data sets and bringing in the whole area of alternative data – your satellite data, your sentiment data, your credit card pricing data – because it really starts to inform,” he added.
The key challenge for asset owners is to gather the data in the first place, before being able to analyse it to enable predictive modelling, Wightman noted. “The Holy Grail is about bringing public and private market data together, particularly for asset owners,” he added.
“Getting the data in one place is where a lot of focus is going to be for the next five years or so,” Wightman said, noting that EY had already seen a lot of investment by asset owners in this area.
A technology specialist at a Southeast Asian sovereign wealth fund confirmed that he had seen “a real step up in investment” on data in the past five years, and that the impact of Covid-19 is only likely to further accelerate that trend.
Examples of big asset owners known to be increasing their focus and spend in this area include Singapore state funds GIC and Temasek, Australia's Cbus and Future Fund, and insurer Prudential Corporation Asia.
FASTER ACCESS
Investors are increasingly looking to tap into more data insights from different sources, such as satellite images and social media text – and to increase the speed with which they can access and make use of the data, the SWF tech specialist told AsianInvestor on condition of anonymity.
“We’re looking at how we can retool data platforms so it’s easier to bring in new data sets,” the tech specialist added. “The goal is to be able to bring that in house within a couple of days [rather than a matter of weeks], so that our portfolio managers can play with it faster.”
A major focus of the initiatives and systems APG has implemented is data management and automation, Asia Pacific chief executive Wim Hazeleger told AsianInvestor late last year. For instance, he pointed to the firm’s alternative data platform for processing and analysing alternative data sources for fundamental stock selection.
APG also employs what it calls a ‘digital butler’ – an investment decision support platform for real estate that collects, cleans and analyses data and automates the investment process step-by-step.
Similarly, Texas Teachers is strengthening its technology capabilities, chiefly to support its approach of increasingly insourcing management of its private market assets, its chief investment officer Jase Auby said in January.
"We are very focused on making better use of the data and information that is in our private markets portfolio," he noted, adding that means gathering much better sector and geographic information.