Google Inc. (NASDAQ:GOOG), Google Inc. (NASDAQ:GOOGL) – Northern Trust leverages data science and partnerships to add value to the investment process

Benzingaa media and data provider that bridges retail and institutional investors, reissues its annual report Global FinTech Awards event at New York City on December 8, 2022.

Prior to this recognition of disruptive innovators in finance and technology, Benzinga will periodically post about brands that it believes have a measurable impact.

Today’s conversation is with Paul FaheyHead of Investment Data Science at Northern Trust Company (NASDAQ: NTRS).

The following text has been edited for clarity and brevity.

Q: Hi Paul, nice to talk with you. Tell me a bit about yourself and how you got involved in the business.

Fahey: I started over 25 years ago in the asset servicing business with another company and joined Northern Trust about 12 years ago. I accompanied asset managers and asset owners in traditional custody and middle office outsourcing.

Now we really have an impact on how they handle money and how well they generate alpha. We’ve achieved this through what we call investment data science partnerships with fintech companies that leverage our access to data on behalf of clients.

You were on State Street before that, weren’t you?

I led their product team for the entire asset management business. So whether it’s custodial, fund accounting, administration and transfer agency, middle office outsourcing, their insurance and big landlord business ‘assets. Previously, I ran part of their business operations in the US, UK and Australia for a few years.

So what inspired the move to Northern Trust?

At the end of 2008, Northern Trust was very focused on growing its administration business for asset managers here in the United States. It had a significant presence in Europe, based on the acquisition of Baring Asset Management’s financial services group.

In an effort to grow here in the United States and provide a global married solution, the president of our asset servicing business, who I worked with before, invited me to develop this.

Tell me about your goal at Northern Trust. What is the product or service?

Investment data science is part of our overall office strategy, meaning everything we can do on behalf of our clients. We think of the whole office as what’s behind the order management system (OMS), which is where the real investment decisions are made by portfolio managers and asset allocators.

How do you know what to focus on?

It starts with a conversation about what our customers and prospects are trying to do.

We care about solving the problems they have or will have in the future. We offer them scalable models from front to back.

To do this, we initially entered into partnerships with Equity Data Science (EDS) and Essentia Analytics.

Tell me about typical customer motivations.

If you look at how a portfolio manager goes through his day, he depends on a myriad of analog capabilities.

Whether it be Microsoft Corporation (NASDAQ: MSFT) Excel and Word documents, email, Teams for collaboration and Alphabet Inc.(NASDAQ: GOOG) (NASDAQ: GOOGL) Google Meet.

Their ability to get true analysis from their captured data, in multiple different locations, is challenging.

So what does Northern Trust do for them?

If we look at what we’re doing with EDS, we’re giving them a technology platform that includes portfolio construction, research and risk management, idea generation, and CIO.

Analysts act and interact on this platform, which digitizes their process, allowing them to see which ideas were not the most effective in generating alpha.

In summary, you allow a better understanding of investment decisions?

Yes. We also provide managers with insight into what their behaviors are doing. Those who destroy and generate alpha. We look at their behavior and their investment decisions, and we feed that back to them with real analytics on the outcomes of those decisions.

What is the advantage of working with Northern Trust compared to its competitors?

We don’t really see a real competitor in the market today.

What we see is a small number of well-resourced portfolio managers who have developed similar capabilities internally because they were able to commit millions of dollars. We also see other alternative competitors as a myriad of analog solutions.

Where I think EDS, in particular, provides a competitive advantage is that it provides access to those tools and capabilities that the big players have. EDS democratizes the investment process.

What are some of the hot topics in the conversations you are having today?

A lot of people are scrambling around the regulatory challenges around ESG. So, being able to give them a tool to show their investors how capable and skilled they are in the space they’re in will be pretty important.

Tell me about some of the big trends you see in the business?

Democratization and access to data.

This matters because investors now see much of the same information that managers historically had a monopoly on. The challenge is to show where you add value.

For example, one of our clients in front of large institutional investors in APAC was asked what he had done in the portfolio to generate alpha. Managers don’t want to be in that position where the investor knows more about their behavior.

What excites you the most in the future?

It is about understanding and helping to communicate the value brought by managers.

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