The Smart Cube is a specialist research and analytics company. Financial services is one of the key sectors we serve, and we support both buy-side and sell-side. Clients include hedge funds, private equity funds, asset managers, investment banks, brokerage firms and advisory firms.
What is The Smart Cube’s key proposition?
In short, we give financial services companies access to intelligent research resources and insights to help them establish a competitive advantage in the marketplace. You could say we act as ‘outsourced research intelligence’, delivering customised analyst support, tools and solutions to enhance business decision-making.
How do you support your financial services clients?
The solutions we offer augment our clients’ research capabilities. We support a wide range of strategies based on fundamental, quant, and macroeconomic themes across all asset classes. Using The Smart Cube’s resources, clients can test potential investment strategies and experiment with new trade ideas for a limited cost commitment.
What would you say are the key areas of value you add to your clients’ businesses?
Firstly, we help clients work more efficiently. Should they be spending hours on heavy lifting tasks such as data cleaning and management or would it be a better use of their time and resources to focus their efforts on making decisions based on our research analysis.
Secondly, we apply our industry experience to provide intelligent investment ideas, smart tools and customised solutions, to meet each client’s investment research needs, in a cost-effective manner.
How do your solutions address the challenges faced by hedge funds specifically?
Evaluating a wide universe of securities in real time and using research to spot the next best trade to execute, before the competition, is a key requirement for successful fund managers. Spotting those trades is getting ever harder because of growing competition.
We help hedge funds address this challenge by conducting and analysing investment research, which informs their decision making. Wading through extensive research and analysis is a time-consuming exercise, and does not always make best use of a hedge fund’s available in-house resources.
How do you add value to your clients’ investment research process?
Investment managers don’t necessarily take sell-side research at face value. They prefer to conduct their own proprietary research, and in some cases, just cross-validate the sell-side research. But coming up with those proprietary views may involve a significant amount of work. Managers suffer from information overload, so need to channel resources and synthesise research, to cut through the noise and find actionable insights – this is where we add real value.
How are your solutions deployed?
Our cloud-based solutions provide the ability to generate and back-test trade ideas using numerical, statistical and econometric techniques, and screen using quantitative, technical analysis or fundamental methods.
Users can run our risk models including VaR calculation, exposure analysis, stress testing, volatility modelling, and forecasting, and do portfolio construction and optimisation work. This might involve tasks such as analysing different risk factors, generating rebalancing signals, developing market-neutral options strategy overlays to aid alpha generation, or studying a portfolio’s performance attribution.
What market trends do you see today, and how does The Smart Cube address them?
Firstly, there has been a shift of demand in the market as more hedge funds look for data science skills. Small and mid-sized managers can’t necessarily afford in-house data scientists, so there is a growing trend for them to engage service providers who can supply these skills.
Secondly, firms are looking for ways to overlay their basic research methodology with additional tools to augment their research apparatus and, to the extent possible, use it as a differentiating factor in the eyes of investors.
Thirdly, fund managers are increasingly being asked by investors what they are doing with respect to Alternate Data and using it as a way to compare talent. Funds which focus on this need can gain advantages, both in terms of capital raising and demonstrating that they are doing things differently to their peers. Investors are always looking for an investment edge.
Teaming up with The Smart Cube’s experienced analysts enables fund managers to focus on making informed investment decisions that support their risk preferences.
When does a client typically engage The Smart Cube?
This varies by client; I would say there is a little more emphasis on the pre-investment phase – for example using The Smart Cube’s resources and solutions to test potential investment strategies and experiment with new trade ideas.
Having said that, there is a lot we do to support businesses in the post-investment phase as well; clients use The Smart Cube to go through vast amounts of data such as earnings reports, to try and interpret management decisions, which combined with historic data, leads to clearer insights and helps them stay on top of their portfolio positions.
Where do you see opportunities for growth for The Smart Cube?
One area is traditional asset management, which is opening up to the idea of using outsourced research analytics solutions, especially on the risk management side. This key function requires a lot of their time and energy to ensure risk frameworks are constantly in compliance with regulations, so it is an area where they see a need to think outside the box.
The forthcoming MiFID II regulatory regime, which will change how asset managers use investment research – not only to ensure compliance, but to add value to their clients – presents new business opportunities for us as well. Investors can leverage our skills and experience to deliver, aggregate and summarise required research. This solution ensures our clients will have easy access to the appropriate intelligence, when they need it, as well as addressing their information-overload issues, and allowing them to focus on their core business.