The past few decades witnessed changes to the investment environment that are massive and permanent. Trading volumes have exploded, driven in part by the colossal surge in passive investing. The United States alone now has more than 20 trading venues (compared to 8 in 1994), with high frequency traders dominating volumes in many stocks.
However, perhaps the biggest impact is the radical increase in the amount of information available for investment decision making, and means to access and process it that were beyond comprehension just a few years ago.
The web and computing power have not only resulted in an enormous increase in the amount of data available for investment decision making, but have created a massive cultural shift. Social media now captures actions and trends by the second. How do you find unique investment opportunities when information is priced in so rapidly that your edge can quickly disappear?
Bottom line: the world has changed—and using the same investment processes and tools from the past limits an investor's ability to succeed in today's environment.
Recently, Ryan LaFond, PhD, a head researcher for BlackRock's Scientific Active Equity team, shared his views on the magnitude of change and how the team has evolved its tactics to embrace cutting-edge technology. A pinpointed, fundamental approach underpinned by sophisticated information gathering tools and analytics allows the SAE team to sift through vast amounts of data and quickly garner insights on more than 8,000 companies every day.