Fixed income

By the numbers: Perspectives on capital markets

Apr 11, 2017

In recent years a number of well-known large-scale trends have dominated news about the asset management industry, but less commented on yet also quite notable in our view is the expanding interest in quantitative, data-driven, and technologically-oriented styles of investment.


 

Indeed, over the past couple years, a number of asset managers have been making high-profile investments in personnel and teams with quantitative experience and approaches. What is it that is driving investors today to look anew at quantitative investing? 

One factor that has driven additional interest in quant investing is the fact that many utilizing more traditional investment approaches have struggled to perform of late. That has led some traditional asset managers to try to adopt quantitative techniques in an effort to improve results. There are real questions about whether these investors are fully committed to the approach, and perhaps more importantly, whether they have adequate expertise and resources to effectively implement it. In contrast, more committed and established quant managers have effectively employed their tools for more than two decades. However, even here there is a palpable sense of excitement regarding the field. That has to do with the veritable revolution in data we have witnessed in recent years and the expanded research opportunities it allows for.

There are overwhelming volumes of data that are relevant to investing today, far more than ever before. For instance, in a given year as of the end of 2016, there are approximately 12,000 earnings calls for firms in the BlackRock Systematic Fixed Income investment universe, there are near 800,000 sell-side reports produced on these firms, according to the team, and there are about 2.3 million articles in the financial press, as measured by newswire searches. The exponential interest in so-called “big data” and the opportunities it can afford is well illustrated in the nearby chart, which enumerates how frequently the terms “big data” and “machine learning” have been used in the press in recent years (see Figure 1).

Figure 1: Annual press mentions of “big data” and “machine learning”

Figure 1: Annual Press Mentions of "Big Data" and "Machine Learning"

Source: Dow Jones Newswires, data as of December 2016

Ralph Smith, CFA
Managing Director, head of the Research Innovation Team, BlackRock’s Systematic Fixed
Susan Harrison, CFA
Susan Harrison, CFA, Director, Product Strategy team, BlackRock's Fixed Income Portfolio Management Group