Why data is the new oil in the digital era

Sep 18, 2018

One of the world’s largest asset managers, Franklin Templeton Investments is actively building its data science and artificial intelligence (AI) capabilities to enhance its investment processes.

Why data is the new oil in the digital era

Data has become one of the world’s most valuable resources thanks to the rapid digital transformation of global industries, also known as the Fourth Industrial Revolution.

“Data is certainly the new oil,” says Grant Bowers, vice president and portfolio manager at Franklin Equity Group. “Oil has historically given tremendous economic power to countries and companies that produce it, and data is going to result in similar economic power in the digital age.”

Companies that are able to generate unique insights from big data analytics and data science have a pivotal information advantage when it comes to helping them thrive in the digital era. This applies across a range of industries, including asset management.

The organisations best placed to flourish are those that use massive datasets to garner unique perspectives into customer preferences, unknown correlations and hidden market trends. They will have the ability to make better, faster and more informed decisions and predictions.

“We are now at a point where companies from various sectors are looking beyond traditional measures for productivity and are embracing the age of digital transformation, where data is a valuable asset,” adds Bowers.

Data analytics, machine learning and AI will help drive better margins, returns and decades of improvements for companies that embrace the fintech future. Asset management firms that harness the power of big data to augment their already established investment expertise are well-placed to succeed in the future.

Franklin Templeton Investments is building its data science and AI capabilities to support its investment management processes, as well as leveraging raw data sources to help its investment teams gain an information advantage. Its aim is to translate data insights into actionable investment-related intelligence.

In order to do so, it is embedding data scientists in each investment team to examine complex datasets for actionable investment-related intelligence, in order to help the investment teams’ decision-making process.

FROM DATA TO DEEPER INSIGHT

“Our investment management data science ‘hub and spoke’ model is well underway,” says Joe Boerio, Franklin Templeton’s chief technology officer and head of investment management data science, fintech and tech risk services. “Our data scientists are embedded in each investment team and work with the core hub, to support the investment management data and shared services.”

The portfolio managers use data insights to create investment-related intelligence that they can put to work across the full lifecycle of investment management. This includes conducting and managing research, optimising portfolios, ongoing monitoring of portfolios, managing orders, executing trades and managing risks. The ultimate goal is to gain an information edge with which to build better portfolios and returns. Investment management data services helping to achieve this goal combine human intuition and insights, supplemented by information supplied by AI.

Boerio says the company’s data science team is working to exploit the datafication of the world, to prove or disprove investment theories, and to gain insight from big data to extract investment ideas.

The digital economy is flourishing at a time when alpha in investment management has become more elusive. But combining effective data science with proven investment processes could give portfolio managers the tools they need to succeed in the ever-changing digital era.

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IMPORTANT INFORMATION

This document is for information only and does not constitute investment advice or a recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. Any research and analysis contained in this presentation has been procured by Franklin Templeton Investments for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Any views expressed are the views of the fund manager and do not constitute investment advice. The underlying assumptions and these views are subject to change. Franklin Templeton Investments accepts no liability whatsoever for any direct or indirect consequential loss arising from the use of any information, opinion or estimate herein. The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not an indicator nor a guarantee of future performance. Any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets is not necessarily indicative of the future or likely performance.