Advertisement

Machine learning allows investment banks to sharply cut research operations and related costs

Street Contxt is a Canadian hedge fund research start-up that has developed a revolutionary multi-analysis platform allowing access from a single platform to reports by sell-side, buy-side, and independent analysts, and into which eminent US investors Steven Cohen and Joe Lonsdale have injected US$15 million.

Asset managers pay a prohibitive US$75,000 on average each year in research fees for access to the work of analysts at major investment banks, and Street Contxt’s service is expected to sharply reduce such costs.

 

BlackRock halves research costs with machine learning


Source: Shutterstock

Street Contxt utilises cutting-edge technology, including machine learning, to gather multiple research operations to a single platform, allowing the elimination of unnecessary information. Sell-side research reports aimed at stockbrokers’ sales teams, buy-side research reports aimed at asset managers at investment institutions, and research reports by independent research bodies are processed, and clients only receive essential information matching their needs.

Research departments have not been exempt from the cost reduction strategies at major financial institutions that have led to headcount reduction. According to a study by Coalition Development, a UK business intelligence provider, the number of equity analysts has fallen from 9,000 in 2007 to 6,282 today.

The number of research communications to clients by major banks and brokers is now as high as 40,000 items per week, but a survey by Hong Kong management consultant Quinlan & Associates reveals that in practice only 2-5% of these are actually seen.

Companies have already significantly reduced research costs, with the world’s largest asset manager, BlackRock of the US, having halved them from $28.8 million in 2014 to $13.4 million in 2016.

It makes sense for both providers and clients to pare things down to only analysis results that are both valuable and relevant to trader.

Blair Livingston, CEO and founder of Street Contxt, said “Wall Street is going through an ecosystem change, where it’s all about content,” with an emerging focus on quality rather than quantity of research. Joe Lonsdale also has high expectations that Street Contxt’s data-driven networks will lead to an increase in transparency as well.

(By ZUU)

Related Articles
- Bank of America moves towards automated banking
- This is how much blockchain technology could cut costs at major investment banks
- Investment banking activity in Singapore in downward spiral