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October 2019

What Can Big Data Tell Us About Market Trends?

Identifying current and future trends is an essential part of investing. For us in quantitative equity investing, the evaluation of both traditional and alternative data in tandem, courtesy of our vast technology infrastructure, is crucial in order to help us maintain an informational advantage.

As part of our investment process, we analyse alternative – or big – data through machine learning, for example natural language processing (NLP), which enables computers to read text in different languages and process this information in a few seconds. NLP makes it possible to quickly identify thematic trends when certain words or topics come up more often than others in news reports or patent filings, for example.

An interesting example of a trend we have seen through our analysis is the rise of Smart Healthcare. For many healthcare companies it is a challenge to improve the current standard of health information provided. According to forecasts, the overall market for so-called Internet of Healthcare Devices will increase in the next few years to almost double its current size. Separately, today, software applications focused on healthcare can provide a variety of insights to help public health, including but not limited to applications focused on diagnosis, quick clinical communication or consolidated patient data for use by physicians. As a result, we have seen connections and dependencies between companies in industries such as medical devices and application software that only evolved because of the trend towards Smart Healthcare.

We believe that investors should think critically about which companies belong to a peer group in a relevant industry and focus on identifying market issues and long-term change in order to recognise relationships between otherwise unrelated companies across industries and regions. The goal is to not always invest in the obvious companies, which may have already been identified by the market as a beneficiary of a growing trend, but to also pay attention to those that other investors may not be aware of and therefore may offer even more value appreciation potential.

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The Big Deal About Big Data

Big Data is transforming companies, sectors and the broader economy. Active management has always been about generating an informational advantage. Big Data, with the right human judgement, can help us do this.