Unconventional data sources help investors beat benchmarks in Asia
Facing fierce competition, actively managed mutual funds are finding new ways to outperform
Pressure from low-priced exchange traded funds has forced actively managed mutual fund managers to find alternative sources of information about listed companies, reports Reuters.
Logistics trends, social media chatter and payments data for unlisted private firms that supply parts to public firms have all been identified as ways to find an edge.
In the third quarter of 2016, Blackrock’s scientific active equity team, managing US$80 billion, used some of these methods to cash in on China’s better than expected growth. The team picked up signs of increased construction activity using satellite imagery of China, leading them to further examine other data, including freight traffic.
The analysts predicted that China was approaching a cyclical rebound. Blackrock’s quantitative equities portfolios increased their exposure to the world’s second-biggest economy just in time for the Shanghai Composite to jump 11% from October through early April.
The only problem explains co-head of Blackrock’s scientific active equity team Jeff Shen is separating the signal from the noise.