Research management solutions: bringing the benefits of automation to the front office

Research management solutions (RMS) have emerged rapidly in recent years in response to the overwhelming volume of analyses, reports, statistical data, forecasts, and opinions that investment managers rely on to make decisions.

Until recently, automating the management of all this information in the front office was a lower priority than back-office processes, but that is changing as the research process at investment firms has changed.

Buy-side portfolio managers once relied primarily on sell-side investment banks for research on companies and markets. Today, sell-side research is but one of many sources that buy-side managers rely on. Independent sources, news media, websites, annual and quarterly reports, and internal as well as outsourced analysis make up an increasingly complex web of documentation from which managers must make objective, informed, and justifiable decisions. Yet relatively little effort has been spent on trying to streamline and automate the buy side's research and investment decision-making processes.

In the wake of the recent market collapse and the discovery of spectacular investor fraud cases, investors' confidence in their money managers has been shaken. Firms that have adopted RMS can demonstrate the robustness of their research process and the depth of their due diligence, providing transparency and engendering trust from their existing and prospective investors.

Information overload

Today's investment management business is more information-intensive and research-oriented than ever. Portfolio managers, analysts, and traders are swamped with information - email, earnings calls, web links, analyst reports, press releases, news alerts, and more. Moreover, the research process itself is very different from what it was just a few years ago. Investment firms now produce more internal research, aggregating information from multiple sources and frequently farming out the analysis.

Managing research is all the more daunting when vital data is scattered across multiple systems and applications that are not designed to support the research process - meeting notes reside on an analyst's PC; an insight from a broker is buried in email; research data from an independent provider resides on a shared drive; contact information for a relied-upon industry expert is in the email address book; and earnings expectations are on the web.

This disjointed state of affairs not only impairs efficiency - it also impedes effective investment decision making. Investment professionals need an integrated approach to organise, synthesise, and analyse the detailed information that shapes their investment ideas. And they must be able to locate and retrieve any single piece of research quickly and easily.

While greater efficiency and cost savings are key drivers for an integrated solution to research management, even more important is the fact that today's marketplace demands greater transparency, objectivity, and accountability. An organised approach to investment research is increasingly a competitive necessity.

RMS offers an answer

Research management is the next frontier for automation and integration in investment management. RMS is a software solution that provides a firm with the means to centralise all research-related information electronically and organise it around its investment processes and preferences.

It allows easy access to all the information related to a particular investment idea. Designed specifically for front-office workflow, RMS enables portfolio managers, traders, and analysts to search a dedicated database and quickly retrieve information without missing any research detail. And it facilitates the sharing of information and collaboration among groups and offices.

RMS also serves as the system of record for investment research, helping firms achieve the compliance and transparency that today's market conditions demand.

According to analysts and portfolio managers who have made it part of their process, one of the main values of RMS is that it enables them to 'work smarter'. With RMS, they have a record of to whom they have spoken and details of past conversations. They can spend more time exploring ideas and applying their cognitive reasoning skills - a less time trying to remember where they stored a piece of data. Ultimately, RMS helps firms make timelier and better informed investment decisions.

How RMS works

Simply stated, the objective of RMS is to bring structure to unstructured data. RMS provides not only a place to store the data, but also a means of organising, categorising, and accessing it.

A research management system creates a shared research dashboard for investment professionals. It provides an easy mechanism, such as a toolbar button, for transferring files built in standard applications such as Microsoft Word, Excel, Outlook, Adobe, and others. Users can save meeting notes, emails, contact information, models, investment theses, proprietary research, calendar events, broker research, and news - all with just a simple mouse click. All of a firm's research-related information, contacts, calendar appointments, and websites are readily available in the RMS repository.

In the most advanced systems, portfolio managers, traders, and analysts can access in-depth information anytime, anywhere they have a computer connection - even from handheld devices. Information can be searched and retrieved by a variety of criteria: ticker symbol, portfolio name, investment theme, source, sector, or country.

Driving efficiency, supporting growth

Over the past two decades, technology has increased the capacity of investment firms to handle an ever-growing volume of assets, portfolios, and transactions, while streamlining complex processes and accelerating the pace of execution. Now, technology has begun to do the same for the increasingly complex process of managing research.

Firms that make the strategic move to a research management solution stand to realise significant benefits: replacing onerous manual data collection with automation; freeing staff to focus on decision making and client service; centralising of critical research data and standardising the research process; improving compliance readiness; and allowing more thorough and accurate due diligence. The above improvements all promote better investment decisions.

Research management solutions close a critical gap in the investment process, delivering further efficiency that is critical for profitability in today's markets, and supporting a superior service capability that is essential for business growth. >

Mark Rice is senior vice-president and general manager of Tamale at Advent Software.

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