Lessons for a New Generation of Economists
Investor relations when investors are algorithms
Corporate investor relations (IR) play a pivotal role as a conduit of information between investors and corporate management.
Alternative data, quantitative analysis, machine learning and artificial intelligence have displaced much of the differentiated value investors had historically derived from IR and research analysts, replacing this with algorithms. The pervasive deployment of algorithms across investment management and research industry has lead to a tremendous growth in the approach, highlighted by media headlines reporting, “Quant hedge funds set to surpass $1tn management mark”.
With such volumes of institutional capital being allocated on the basis of analysis by algorithms, it’s understandable that corporate issuers, their executive management, boards and IR often feel exposed to the preferences and choices of algorithms who can neither be reasoned with, nor explain the details of their decisions – capital is simply allocated and reallocated.
While these algorithms offer distinct advantages for some investors, they are also not infallible and are accompanied by their own particular weaknesses and vulnerabilities.
Facing increased investor appetite for more systematic, computer-driven investment strategies, some IROs resign themselves to fate, believing there is little they can do to influence the decisions of the ‘Algo gods’. However, others take a more data-driven, analytical and scientific approach: they too turn to data and AI, exposing clear and actionable plans to mitigate and curate the behaviour of algos and demonstrate the enhancement of shareholder value for both algorithmic and human investors alike.
The IRO again assumes their pivotal role as a conduit of information between investors and corporate management – even when that investor is an algorithm.
In this webinar, Grant Fuller discusses how IR can ‘think like an algo’, identify and take advantage of the generalised weaknesses and vulnerabilities in algorithmic strategies, and outlines five practical steps to mitigate and mediate the impact of algorithms on the shareholder register and market dynamics.
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