Tuesday, November 22, 2016

Bringing Big Data from the Back Office to the Board Room- The Role of the Data Scientist

The Bloomberg article,  "Big Data Is a Big Mess for Hedge Funds Hunting for Trade Signals", discusses the value of Big Data in the pursuit of generating top and bottom-line growth and growing assets under management.  One of the article's heavily emphasized points is the current discrepancy in perceivable value between Big Data itself (valued greatly) and the data scientists that spent hours cleaning and analyzing data for the benefits of a firm's traders (undervalued and misrepresented in terms of corporate value).

As I've mentioned in a previous post, Big Data is vast and provides the asset-management industry with another tool to use in their research and trade decisions.  However, it's only useful if someone with the appropriate statistical, mathematical, and analytical acumen spends the time to clean that data and arrives at a telling conclusion--if there even is one.  Their contributions to investment firms that employ them are invaluable and yet they are offered very little "say" at the corporate roundtable.

Asset-managers looking to successfully deploy data-mining practices as part of their firms overall investment strategy need to include data-scientists in their investment and management-level discussions, not just relegate them to the back-office operations team.  Considering how new and continuously-developing the world of Big Data actually is, data scientists possess the ability to convey these developments to portfolio managers and traditional equity and credit analysts, but only if they are granted the opportunity.

Yes, one could argue that personalities between traditional finance-types and scientists could clash (a la The Big Short), and firms are afraid of changing how they arrange their management in fear of backlash.  But communication and interpretation is half the battle of applying Big Data to investment decisions; the other half is finding the right data to leverage, if it exists. So, firms should adjust for what they can control and bring their "quants" into more substantive corporate roles.  That decision will pay dividends both in terms of corporate culture and efficacy of research methodologies.

Article Source:

http://www.bloomberg.com/news/articles/2016-11-22/big-data-is-a-big-mess-for-hedge-funds-hunting-for-trade-signals

1 comment:

  1. Taylor’s article has provided an interesting insight into the way funds are employing data scientists and raises a question about whether their sills are being integrated into the firm’s decision making process as much as they could be. He begins by making the assertion that the best way to draw value from the troves of big data that are so treasured by firms, is if an employee with the right statistical, mathematical and analytical skills (i.e. a data scientist) combs through it to determine which factors can contribute to the firm’s decision making process. While this assertion appears to be logical, the article explains how these employees are still kept in the dark regarding decision making in the most senior management levels.

    I agree with Taylor’s viewpoint that asset-managers who wish to use data-mining as a value adding strategy need to include these employees in the management level discussions that occur. It is rather clear how portfolio managers and other analysts could benefit from the information derived by the data scientists, therefore having greater access to these types of people would be of great benefit to the firm as a whole. Another positive of having greater synergy between these two groups of employees is that they’d be able to understand how each individual works, what they like to know and what they see as irrelevant. This could help the data scientists pay attention for specific trends in the data, increasing the speed at which they could report back with actionable data.

    Finally, Taylor highlights the potential fear of a personality clash between the two groups. In today’s fluid business and technology environment there is little time or room for antics such as this to get in the way. Firms need to pay attention to the culture that runs through its offices, ensuring that being successful, which in this cases is recognizing a positive return, is the most important thing. If they were able to facilitate a successful integration of various teams, they would benefit, as the organization would become more efficient, mission effective and resilient.

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