Data & Analytics Insights

Mastering wealth management: the quantitative modelling advantage

Priyanka Shetty

Product Manager, Wealth Management

Adam Baron

Big Data, Quantitative Research

In this insight, we examine the way the integration of solid quantitative research, combined with the latest AI-powered technology, provides immediate benefits, from improved risk management to alpha creation. We discuss:

  • Accessing the right data, tools, and analytics to discern meaningful signals from the noise for market participants, as the wealth space continues to evolve.
  • Delivering cutting-edge tools and advanced quant models that equip investors to optimise investment decisions, with StarMine for Retail Wealth.
  • The benefits of targeted insights, like into predicted M&A activity or rising credit risk, in multiple real-world conditions. 

The wealth landscape

The wealth landscape continues to evolve at pace, shaped by ongoing digitalisation and a data revolution that offers ever-increasing volumes of data and content to wealth industry players.

The ever-growing availability of data has become a double-edged sword, offering substantial opportunity, but also leading to information overload and the potential inability to find the signal in the noise.

Wealth managers, advisors and investors alike need the right tools if they are to successfully sift through, analyse and interpret volumes of data – at speed – in a highly dynamic market, but traditionally many such tools have only been available to institutional investors.

LSEG StarMine for Retail Wealth has changed this, delivering advanced functionality for all investors – a solution that unlocks the many benefits of quant analytics and offers hands-on help to identify risks, mitigate losses and optimise returns in the fast-paced wealth environment.

Delivering targeted help

LSEG StarMine for Retail Wealth delivers access to cutting-edge technology that removes emotional biases and allows you to tap into quantitative models, that equip you to identify potential investment opportunities, diversify your portfolio more effectively, and make responsive decisions that reflect current market conditions. This entails:

  • Spot trends: observe and understand the direction in which the market or a particular stock is moving. By identifying these patterns, you can make informed decisions about when to buy or sell.
  • Identify top stock picks: pinpoint the most promising stocks based on various factors such as performance, growth potential, and stability; enhancing your investment strategy.
  • Access insights from industry experts: get valuable guidance and advice from industry professionals on investment decisions and ways to navigate the complexities of the market.
  • Assess risk and evaluate investment stability: evaluate the stability of your investments and assess potential risks, by maintaining a balanced and secure portfolio. 
  • Feel the market pulse with sentiment analysis: gauge the overall sentiment of the market by analysing various data points, provide a broader understanding of market conditions, assisting you in making responsive and timely investment decisions.

With seamless API delivery and end-of-day updates, StarMine combines robust research and advanced analytics to deliver the data and tools you need to maximise alpha and manage risk more effectively.

Equipped with a variety of models and analytics, peer-comparison features, and an optional media sentiment model that gauges sentiment across various news and social media platforms, you can enhance your investment decision-making process.

Real world results

Our recently launched M&A target model delivers insights into companies that are potential targets for merger or acquisition activity and allows you to profit from price movements ahead of such predicted activity.

In one recent example, StarMine correctly predicted M&A activity surrounding HashiCorp well ahead of any announcement. This gave investors early warning of the opportunity to substantially benefit from stock price gains:

From 8 December 2023, the StarMine M&A target model consistently predicted that HashiCorp was a likely M&A target. The share price of HashiCorp jumped over 12.7% to US$29.88 in extended trading on 15 March 2024 as the company announced it was exploring options, including a sale. On 24 April 2024, IBM announced that it was buying HashiCorp for US$6.4 bn, prompting a further share price hike to US$32.85 in extended trading.

In another relevant example – this time concerning credit risk – StarMine Credit Risk models detected significant credit risk for more than 10 months before the media reported the high-profile bankruptcy of Yellow Corporation (read more in our insight here). StarMine’s Combined Credit Risk quantitative model substantially downgraded Yellow in early November 2022, well before the announcement in August 2023.

Looking ahead

Robust research, backed by global expertise, lies at the core of effective quant modelling. In addition, digital capabilities – that cut through the noise, pinpoint relevant insights, and guide responsive investments – will continue to shape the wealth industry as investor expectations undergo ongoing evolution.

Recent LSEG-sponsored research[1] into changing preferences and emerging trends in the wealth industry shows that investors are overwhelmingly willing / somewhat willing to use AI-enabled processes for researching products and services (92%).

In line with this, we expect hybrid investment models that leverage both human expertise and advanced AI to continue to be key for long term success. Alongside these developments, StarMine will continue to evolve and innovate, leveraging trusted data, personalised insights, and advanced technology to help you address the challenges of an ever-changing wealth space.

[1] Conducted by ThoughtLab, this 2023 research included global surveys of investors and investment providers and was based on a survey of 2,000 investors across countries, wealth levels, ages, lifestyles, occupations, gender, and other characteristics.

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