Money managers are planning to add investment analysis software and data feeds in the coming months to get a better handle on today's difficult investment markets.
Pensions & Investments interviewed 40 -- generally large -- money managers with $894 billion in assets under management. The survey found high interest in analytical software for equity and fixed-income markets, data software for research and pricing information. Among the findings:
* Almost 68% of the managers said they were interested in one or more equity, fixed-income or risk-analysis products. Nearly 48% said they were interested in data software.
* Another 32% said they wanted to add some form of style analysis and performance attribution software. Several others said they had already acquired it.
Further breaking down what kind of software the managers are interested in, about 28% said they want to add fixed-income analytical software in the next 12 months. Just slightly less, 25%, said they want to buy equity analytical software in the next 12 months.
About 23% of the managers surveyed said they are interested in acquiring software to help with risk management.
Certainly not all managers are looking for additional analysis software. Many of them probably already have it.
But some of the best-known money managers expressed interest in analysis software. They included: Acadian Asset Management, Boston; Allied Investment Advisors, Baltimore; Bradford & Marzec Inc., Los Angeles; Dietche & Field Advisors, New York; First Quadrant, Pasadena, Calif.; Glenmede Trust Co., Philadelphia; Hartford Investment Management, Hartford, Conn.; and Phoenix Duff & Phelps, Hartford, Conn.
According to software vendors, part of the reason for the high interest is that many managers now have the budgets to buy the analytical software products they want. The bull stock market has significantly increased assets under management for many managers, bolstering increases in their fees.
But the bull market has also created problems.
It has "made active equity money management much harder," said Paul Green, a vice president with BARRA Inc., Berkeley, Calif. BARRA is known for its equity and fixed-income analytical software, investment models and other products.
"Less than 20% of the active (equity) managers are beating their benchmarks in the last couple of years. That is typical of a rising bull market. That is the hardest market to beat," Mr. Green said.
Managers are looking for an edge, and they believe they can get that from the analytical software that costs about the same as one skilled investment staff person, Mr. Green said.
In the fixed-income market, low interest rates are a problem, said Teri Geske, vice president for product development at Capital Management Sciences Inc., Los Angeles, a vendor of software for fixed-income analysis.
Because rates are so low, it is hard for many managers to find relative value in fixed income securities, Ms. Geske said.
"People are needing tools to help them decide what is the best thing to buy," she said. Managers need to know on a relative basis whether it is better to buy some "new asset backed security, this Triple A corporate or whatever the street is throwing at people."
In the current market, it is not just a matter of buying single A corporate bonds with a good yield, she said.
Concern about risk has also spurred interest in analysis software. Regulators are pressing investment managers to prudently assess risk, she said.
"Value at risk is really a hot topic" in the current market, said Dan Anderson, a vice president and principal at Wilshire Associates Inc., makers of Quantum analytical software for equity and fixed income investment.
Managers want to know and to be able to tell clients how much they could lose in a worst-case scenario for investment. They also want to know to what extent bets are being taken, he said.
Some managers with multiple portfolios are having difficult understanding wide variance in performance, Mr. Anderson said. They need portfolio analysis software to explain the variance.
Mr. Anderson said he is also seeing a lot of interest from investors in total fund risk management.
Wilshire Associates, he said, has a new product to analyze portfolios and provide numbers of the total risk a portfolio is taking.