San Francisco-based index data provider Revere Data and SIX Financial Information are investigating opportunities to combine Revere’s new classification schema—which assigns weights to industries and sectors that comprise a company’s revenues, and applies the same factors to partners, suppliers and peers to determine exposure—with SIX data to create tools for risk staff and asset managers.
Revere will add the new information to its Revere International Sector Classification (RISC) hierarchy in June, beginning with coverage of companies that comprise the S&P 500 index, though the vendor plans to expand this to cover all US companies by year-end, says Vivian Ramos, chief operating officer at Revere.
“We won’t just be mapping companies with sector classifications; we’ll be quantifying those, based on how revenue is derived,” Ramos says—for example, to reflect that the revenues of a company like Apple comprise diverse business areas spanning computers, smartphones, music devices, software and downloads.
The classifications will also show revenues derived from—and hence exposure to—specific suppliers and countries. This could be used to increase a firm’s exposure to a company’s success by investing in its suppliers, or conversely to ensure that a firm is not over-exposed to a particular sector or region. Since many US companies derive significant revenues from overseas business and suppliers, investing in a US stock could still leave firms exposed to regions that they may want to avoid—or vice versa, they could increase their profits from growth regions by understanding the revenue breakdown of US companies exposed to those regions, she adds.
“Although people look at where the majority of revenues come from, a company can have significant revenues in a completely different area. So for systematic risk, investors need to quantify multiple levels of classification,” Ramos says. “And once you achieve that for risk, you’re close to being able to use it for portfolio modeling and stock selection. It ensures a portfolio manager is looking at the right peer group to make better trading or hedging decisions, because they know exactly who will be impacted by anything affecting one company.”
Revere will refresh the full data on companies annually when they file 10-K results, but will incorporate other information—such as corporate actions, news, and results of investor meetings—on a daily basis, and make the information available as a database or via an API. However, Ramos says the biggest area of potential growth is from incorporating the data into services from third parties. “Most people don’t want multiple services, so our goal is to find partner vendors to work with to bring this to clients,” she says.
Though no formal partnership yet exists, Revere and SIX Financial Information—which supplies the vendor with security master and reference data—have been approaching clients about the potential to integrate Revere’s hierarchy within SIX data products.
Barry Raskin, managing director of SIX Financial Information, says any expanded relationship is still in “the exploratory stages,” but that the two have built prototypes of a display widget and spreadsheet-based files that link SIX’s security data to Revere’s sector codes and supplier data.
“I would love to have a jointly-branded widget that we could bring to clients. Revere is a relatively small player, and we can help them achieve broader distribution across the financial markets, especially in Europe,” Raskin says. “Revere combined with our underlying data is a powerful offering… that has real value across an organization, from compliance to asset managers or hedge funds looking to find the next level of information that is buried deep. It’s good, publicly-available information, but is not linked together well, except by Revere.”
The goal of these initial discussions with clients is to obtain feedback so the vendors can build working solutions tailored to client needs, which will enable firms to leverage the datasets together, without having to integrate them themselves, Raskin adds.
Jesse Lund talks about real uses for DLT in the capital markets, lessons learned while rolling out IBM's blockchain platform, and what’s ahead for 2018, and into 2019.Subscribe to Weekly Wrap emails