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Northern Trusts Investment Data Science capabilities offer a curated suite of solutions that help institutions digitise their investment process, enabling faster and smarter investment decisions. Paul Fahey, Head of Investment Data Science, chats to Hedgeweek about growth opportunities and the drivers of client demand and current challenges facing the hedge fund industry

Where do you see the most significant opportunities for growth in the coming year?

Technology has altered how managers operate and how they analyse their data, and there are opportunities for hedge fund managers to make better use of decision-support tools. Perhaps the greatest opportunity for growth is related to artificial intelligence (AI) and generative artificial intelligence (Gen AI), which has the potential to revolutionise how businesses operate.

Northern Trust continues to research this technology to make processes more efficient. The desire to incorporate Gen AI into business models will continue to grow due to its capacity to manage data, streamline content creation and workflow processes, enhance risk assessment and foster innovation. Successful execution will depend on the development of human skillsets and the quality and the quantity of the data underpinning the models.

Can you outline the most impactful drivers of client demand in the coming year?

Access to quality data and advanced technologies remain critical drivers of client demand. Now more than ever, firms are looking to harness the power of data science and analytics to turn information into meaningful insights. Northern Trusts Investment Data Science and its partnership with Equity Data Science (EDS) enables clients to optimise their investment process and deliver enhanced outcomes through scalable and repeatable decision-making. The power of these tools enables institutions to enrich their investment process, delivering faster and smarter investment decisions.

What have been the biggest drivers of growth within your business?

Several factors have contributed to the growth of Northern Trusts Investment Data Science business. Notably, increased interest in data analysis due to flexible, cost-effective and powerful solutions that leverage modern technology becoming commercially viable to deploy towards improved decision-making and higher productivity. Managers are looking beyond merely collecting data and are now asking what they can do with the data to drive measurable outcomes and, ultimately, investment performance. Northern Trust offers tools to answer these questions. Another driver of growth has been the recent advancements in AI. These combined factors are shaping how investment decisions are made and portfolios are managed in a data-driven and technologically advanced environment.

Which are the most significant challenges in the hedge fund industry right now and how can they be best mitigated?

Challenges facing hedge fund managers today are similar to ones they have always faced: how to generate alpha and distribute their product. To do this, they must become better at managing their data.Yet collecting and updating data can be extremely time consuming and daunting for managers that are stretched to the limit. Changes to the competitive and regulatory environments have further impacted managers research management process, prompting a need for increased transparency and integration into investment decisions, unleashing the value of a managers own data.

With the advent of state-of-the-art cloud-based platforms, many of these challenges have solutions. As investment teams seek to differentiate themselves, leveraging leading technology to improve decision-making is critical. Digitising the process enables the capture of decisions that were not made or taken, adding further intelligence to the managers ability to generate alpha and attract clients.

What role can technology play in portfolio risk management?

Recent advancements in technology provide the tools and analytical capabilities to assess, monitor and mitigate risks associated with investment portfolios. Technology can help aggregate data inputs, simplify research management and idea generation, streamline risk modelling and backtesting, and create a transparent, digital environment to execute, measure, and refine the investment process. Integrating advanced technologies that provide real-time data analysis, can help assess risk and enable portfolio risk mitigation strategies contributes to the overall resiliency and stability of an investment portfolio.

Paul Fahey, Head of Investment Data Science, Northern Trust

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Harnessing data science to turn information into investment insights - HedgeWeek