Fundsters and PMs may want to keep an eye on a new tool from Thomson Reuters
to predict what their competitors will be buying and selling next quarter. This week the business intelligence specialists unveiled StarMine Smart Holdings
, a model that predicts what holdings mutual fund PMs and other institutional investors are likely to buy and sell in the near-future.
, global head of intelligent analytics at Thomson Reuters, said that the team has "reverse-engineered fund managers' stock selection processes to predict what changes they are likely to make in their portfolios based on a comparison of individual stocks to the fundamental characteristics they appear to care most about."
"The main driver in our research was to determine what funds are likely to do next, rather than reacting to what they have just done," Malinak stated.
Reuters bought Starmine, which develops equity selection models for investment professionals, back in 2008. Shirley Birman
, manager of Starmine's quant consulting team, confirmed that for Smart Holdings "the output of the model isn't manager-specific, it's stock-specific," on a scale of one to 100.
"If you have a higher ranking, it means that you are likely to be purchased by institutional investors in the coming quarter," Birman told MFWire.com
, noting that the new model draws from Thomson Reuters' proprietary ownership data for institutional investors. "It's one factor to look at."
Company Press Release
20 FEB 2012
THOMSON REUTERS LAUNCHES NEW MODEL TO PREDICT FUND MANAGERS' STOCK PICKS
New York - Thomson Reuters today announced that it has introduced a model to predict which stocks fund managers are likely to buy and sell from their portfolios. StarMine's Smart Holdings model forecasts institutional investors’ future buying and selling behaviour, identifying which companies would become increasingly or less attractive to these investors over the following quarter. This forms part of Thomson Reuters aims to help professional Investment managers generate more profitable investment ideas and mitigate risks, giving them an edge over their peers.
Smart Holdings combines several different Thomson Reuters content sets including ownership data, corporate financial data and a proprietary, predictive measure of analyst revisions, called SmartEstimates®, to gauge how well a company is aligned with the current preferences of institutional investors.
Dr Stephen Malinak, global head of intelligent analytics at Thomson Reuters, said: “The main driver in our research was to determine what funds are likely to do next, rather than reacting to what they have just done. The basic idea is that we have reverse-engineered fund managers’ stock selection processes to predict what changes they are likely to make in their portfolios based on a comparison of individual stocks to the fundamental characteristics they appear to care most about.”
StarMine Smart Holdings is based on the underlying hypothesis that fund managers tend to buy companies with particular fundamental characteristics (such as price-to-earnings, estimate revisions, or price momentum). StarMine Smart Holdings determines which of 25 widely followed factors are currently important to a given fund owner, and with what relative importance, to create a purchasing profile for each fund.
This purchasing profile is then applied against 40,000 stocks globally to determine which of them may be attractive to a given fund. Results are then aggregated across funds to provide a gauge of a stock’s attractiveness to the current market preferences. The result is a predictive model that ranks stocks on future increases or decreases in institutional ownership, indicating which stocks will become increasingly or less attractive to investors. Eleven years of data reveal that the Smart Holdings model produces consistent positive returns globally.
The StarMine Smart Holdings model is provided as a daily data feed from Thomson Reuters, as well as through a range of its desktops, such as Thomson ONE for Investment Management and the newly-released, Datastream Professional.
About StarMine, SmartEstimates® and Smart Targets
Today Thomson Reuters provides equities and credit based alpha and risk factors for investment managers as well as corporate investor relations teams. Thomson Reuters has long been known for its enhanced sell-side forecasts, One example is StarMine SmartEstimates, which predict the direction of earnings surprises with a success rate of around 70% when the SmartEstimate significantly differs from the consensus estimate. Smart Targets for corporate investor relations officers calculate the likelihood that a fund will purchase or sell a given security based on the fund’s historical purchasing activity and profile, improving targeting of institutional asset managers.
About Thomson Reuters
Thomson Reuters is the world’s leading source of intelligent information for businesses and professionals. We combine industry expertise with innovative technology to deliver critical information to leading decision makers in the financial, legal, tax and accounting, healthcare and science and media markets, powered by the world’s most trusted news organization. With headquarters in New York and major operations in London and Eagan, Minnesota, Thomson Reuters employs more than 55,000 people and operates in over 100 countries. For more information, go to thomsonreuters.com.
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