The Portfolio Manager’s information gathering challenge

Published on March 11, 2014 by Guest Blogger

Every thinking portfolio manager has more questions than time to find the answers to all of them. Some of the unanswered questions can be ignored – there is value in acting quickly; taking calculated risks is part of the game.However, quite often, there are questions that do need to be answered, but aren’t because of time constraints, insufficient human resources on hand and other priorities. Sometimes, these unanswered questions come back to bite the portfolio manager.

Is there a way to reduce the unknowns without losing time and with minimal dollar investment? As it turns out, “information gathering” is the second-most preferred activity, after financial modelling, that portfolio managers asked our analysts to perform. “Get me the market share of ABC versus its competition in its 3 markets”, “Is ABC growing faster than XYZ over the last 6 quarters?”, “Give me a monthly chart with CPI and 1-year interest rates for the last 5 years”, and so on. The information gathering challenge

Imagine making a 2-week trip to a few cities/ countries to visit plants and do management meetings. As you head back on your flight, you will be able to list 100+ questions that you wish you could quickly get answers to. Of these, let us say that 20 questions are critical to start with. Now, imagine that you got the answers to these 20 questions by the time you reached your office the next day. Does that make a difference to your speed of decision making, and your ability to be quick and nimble?

Having unlimited ability to gather information quickly, without having to hire and commit dollars to a large team, makes a strategic difference to an investment firm’s ability to analyse and take decisions. Our buy-side clients should know – after all, they collectively manage over USD 8.5 trillion in assets.

Tags: