Originally published on Hedgeweek.com on January 20th, 2023.
Technology is elevating the quality and scale of primary research – allowing managers to undertake in-depth, high quality research at a pace and breadth not previously possible. By conducting expert surveys through specialist firms, investment managers can reach a greater number of professionals in a fraction of the time, and collect reliable data they can use to form the basis of their investment decisions.
Accessing expert networks has, historically, been a manual and onerous process. Managers would typically make calls to experts in their network, which, though effective at providing direct insight, can be limiting. There are so many hours a manager can dedicate to making these calls and their outreach to experts is also limited by their personal contact book.
This capability can be broadened, deepened and scaled by conducting surveys through a firm like NewtonX.
“It is technology that has allowed us to conduct these expert surveys. It is our key differentiator,” explains Khang Nguyen, Head of Content and Compliance at NewtonX. Founded by two former McKinsey consultants, the firm supports investment managers making use of fundamental research. Using a vast array of methodologies – from expert surveys to more traditional expert interviews – NewtonX finds the right qualified experts, conducts targeted surveys, and arranges 1:1 expert interviews.
In particular, the survey capability allows investment managers to move beyond the traditional approach of making between five and 10 calls as part of their research process and instead, tap into a much larger sample of knowledge and insight. By providing expert surveys, the firm helps investment managers get an edge in their decision-making by delivering primary research insights at scale.
Managers use these surveys to gather information about specific companies they either are investing in or plan to invest in. They also use these research methods for scoping out competitors or to confirm an investment thesis they are already confident in.
The expert networks most investment managers currently use are manual in nature. When quantitative research methods are used, managers often are not fully cognisant of whether the respondents are qualified to be answering the questions posed to them.
“We have a proprietary search engine which is based on machine learning, AI and structured data which identifies qualified experts for a survey. It focuses not only on ensuring the right people are targeted in terms of qualifications and job titles but it also finds decision-makers in the client’s chosen area of focus,” Nguyen explains.
Newton X uses AI and ML to drive better search results, allowing the company to identify experts that have the knowledge, experience, and expertise that investors are looking for, things that are not apparent from a job title or resume.
Through this, NewtonX is able to offer access to niche and difficult-to-access networks. And the system provides 100% ID verified respondents to make sure the respondents really are who they say they are. This means managers can be assured the data they are collecting is reliable.
The technology deployed by NewtonX also means the survey results can be further analysed. The main reason is for getting deeper, richer insights by mixing methodologies with the firm’s Qual-Quant-Qual approach. An example of this is if any experts responded unexpectedly, the firm can reach out to them to better understand their reasoning. “The tools we use allow us to identify outliers very easily and it is those differences which managers are looking for. The data from those outliers can provide a competitive advantage and this is a service NewtonX provides, which no other company is currently able to offer.
“Currently all our work is bespoke, but clients ask many questions which are often universal,” he says, “so we are looking to provide access to that base level of information which could, potentially, answer 80% of a client’s initial questions. Then they can request follow ups for more specific questions to get into further detail.”
As a result, managers can get large swathes of information a lot faster and then dive deeper into areas where they need additional information.
Data visualisation is “essential for exploratory data analysis”. As investment professionals are often time constrained, having access to information which is instantly understandable can elevate their decision-making capabilities.
NewtonX is seeking to support this by exploring ways to incorporate more data visualisations within the surveys it conducts. “Right now, survey providers deliver the final output as CSV or – at best excel – requiring clients to manipulate excel to allow them to analyse information; they should be concentrating on what the best investment opportunity is within that data,” Nguyen observes, “working on a way to help them visualize the data more easily, so it can take 10 or 15 minutes to digest. We think this functionality will save our clients 20-40 hours per project.”
Ultimately, technology innovation drives change which, in turn, improves productivity. For investors, this edge comes with finding alpha, therefore anything able to support those endeavours tends to be welcome.
“It is key for us to push the technology further so our clients can get access to additional tools which provide value-add and also help them improve their investment process,” says Nguyen.
For example, in the world of traditional hedge funds, little has changed in terms of process over the last 20 years. However, as more and more data becomes available, they need to learn how to find a competitive edge in ways which are efficient.
Through the use of surveys, hedge fund managers can maximise the use of quantitative data and also refine the insight gained from any qualitative research they undertake.