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By Rohan Fernando
Static research reports are still the norm…
Investment research plays a critical role in the capital markets sphere, providing high-quality analysis and investment ideas for investors to make informed investment decisions. Such research is usually in the form of reports, downloadable electronically or obtainable in physical form. Research analysts compile hundreds of thousands of such reports and share them with investors.
... but interactive, responsive reports will soon become the trend
I once asked an investment banker why investment research reports are still in PDF format, and why there are no mobile device-based research report readers. His response was that PDFs and other static documents will remain as they are for the next 10 years or so because investors are familiar with the current format and have not considered an improvement. It is the story of the iPhone all over again. When the iPhone first entered the market, people started questioning how it could work without a keyboard and why it is so expensive. Today, the only questions are from where the iPhone can be bought and when the next version will hit the market. Even I was sceptical about buying a full-touch smartphone at first, but now I cannot imagine a smartphone with a keyboard. I believe the same is about to happen with investment reports.
Constant interaction and discussions with our quantitative research clients at Copal Amba, a Moody’s company, has provided us with considerable exposure to many new concepts and systems developed and adopted by these global capital market players. The concept of interactive, user-customisable or responsive reports is one such new and emerging notion that we see gaining traction within the research sphere of global investment bankers. Thus, in this article I will attempt to share my experience and thoughts on this emerging trend, which I feel is going to become a competitive tool for investment bankers in the future.
"Sri Lanka’s investment community has been relatively slow in adapting the technology for interactive reports. Technology helps generate more intuitive reports, as well as features that could be used by broker firms or investment banks to maintain connections with their clients. Even in developed capital markets, interactive reports are yet to gain widespread popularity, but investment banks are actively attempting to promote the concept as a competitive tool. Thus, this would be a wonderful opportunity for Sri Lanka’s capital market players to be proactive and start providing more interactive reports. It will spark a stronger, more positive attitude among investors, especially foreign investors, about the local market and its players"
Responsive reports – A new revolution
Responsive reports, albeit not in use in Sri Lanka, are used by certain top investment banks and on Wall Street, implementing interactive features in their research reports, while others have embarked on developing the infrastructure required to publish responsive reports. Responsive reports are a result of responsive web designing – it is simply the act of converting an investment report into a responsive web document, and making it accessible via the internet.
Responsive web design (RWD) is a web design approach aimed at crafting sites to provide an optimal viewing experience – easy reading and navigation with minimum resizing, panning, and scrolling – across a wide range of devices (from mobile phones to desktop computers). (Source: Wikipedia)
The main technology behind responsive reports is HTML and CSS. Most responsive reports use HTML 5, an updated version of HTML, and are not fully compatible with older browsers. However, HTML 5 is well supported on mobile device-based browsers, such as Chrome on Android, Safari on IOS, and Internet Explorer on Windows Phone 8. Once the user-customisable feature is embedded in reports, they will be much more interactive. These types of reports are web-based applications that behave similar to reports with an RWD framework. Interactive, user-customisable reports will have a connection to a sophisticated back-end, which can generate information for the report, and the report will connect to this back-end using the internet and acquire the data that users require.
User-customisable reports offer interactive features…
Banks should liven their investment reports, meaning a report should be able to stand by itself. At present, all reports are designed by an analyst according to what they want to see. These are dead reports, because they neither change appearance or content, nor do they respond to user requests. For example, if an analyst sends a portfolio risk report to an investor, it will reflect only the risks of the predefined portfolio, but livening the report means that the investor will be able to request the report to change weights, and the report would be able to respond and adjust its content and charts to the new weights and show new risks. These types of reports are highly dynamic and interactive, and wrap themselves with responsive templates to enable viewing from any platform or device.
…that provide greater value addition for investors
Nowadays, investment banks have a significant amount of data from which they can generate vast amounts of useful information. However, investors see only a small chunk of this information, owing to limited access. Currently, reports are compiled offline, meaning that an analyst compiles a report with would-be-useful information. This process will never allow the investor to connect with the bank; it isolates the investor, unless these PDF reports use interactive features with the Flash facility. Furthermore, these static reports are not up-to-date. If an investor misses the email and opens it after a few days, the report will be less useful.
Time-saving – A critical benefit of interactive reports
The idea behind interactive reports is the need to ensure no predefined content. Analysts will create placeholders for information using special tools, and once the report is published, users will be able to see the report with some default information for the day. However, if an investor opens the report in a few days’ time, the information will still be relevant for that day, as the report has features to update itself. Same-time technology can also enable users to see the historical report by selecting the respective date.
In equity reports, the task of creating the initial document means that the analyst’s role remains of great importance. However, the new features embedded in the report eliminate the need for the analyst to regenerate the document for different parameters (such as a date); it will update itself and change its nature according to user requests. The web is simply a request-response model, and the right use of technology on an investment report will enable it to respond to investor requests.
The presence of interactive, responsive reports saves the time analysts spend on creating daily and weekly reports; and reduces investors’ dependence on analysts for timely information in emails. Investors would merely need to select the required report on a smart device or laptop, and change the date or other parameters to request the information required. Furthermore, it forges a stronger connection between the bank and investors.
Technical analysis is a potential beneficiary of interactive reporting
This model will be useful in technical analysis, and be a new experience in equity research. Most technical analyses are done with tools, and the technology is already coupled with quantitative research, but it is yet to receive the flavour of the web. Only a few quantitative research tools can be accessed online. Owing to the complexity of statistical and mathematical tools, not all investors can generate the report they need, and thus depend on analysts. However, today’s impressive user interface technology enables the layman to perform any complex task. Interactive quantitative reports published online provide the option of regenerating information by changing the parameters. All these reports are generated based on certain parameters (such as a date range, weights collection, interest rates, window size, or data that a quantitative strategy requires to generate its result), which can be changed to generate a new set of data within the report. This will allow users to forecast for many scenarios, and encourages active investigation of the market using historical data. A common occurrence is a discrepancy between the investor’s view and the predefined parameters put forward by the analyst. In this scenario, it is difficult for the investor to visualise the result; however, interactive reports eliminate this problem.
Advancements in IT complement this innovation
One might question the possibility of publishing real-time reports on demand, because some reports may consist of charts generated from complex calculations. While this question is fair, several once-difficult tasks have now been made easy by technology. For example, high-performance computing provides instant results for the most complex calculations. Graphic cards – initially popular among youth, given their effective use in high-end computer games – are now sought after by investment banks to boost the performance of their applications. Cloud computing and parallel computing are two other options for expediting financial calculations. Such solutions can solve performance issues in real-time reports. Generating an interactive quantitative report will require substantial computing power; fortunately, today, high-performance computing is not an expensive commodity.
Such systems also involve risks
Interactive reports are practical and user friendly. When used within a responsive web framework, they can be viewed on any PC or smart device. All that is required is a live internet connection. It can be argued that the ease of access in interactive reports may pose a data security threat. I agree: every return will have its associated risk. The security of a sophisticated support system would mitigate the risk.
Compared with responsive reports, PDF reports are secure because they are offline. Analysts place the content on the document and send it in an email. From this point, the bank’s network teams wash their hands off the report. On the other hand, when an analyst sends out a web-based interactive report, it creates connections to the banks back-end each time a user opens it. Moreover, PDF reports would be in an investor’s email inbox, while web reports would be on the public domain. If someone is aware of the link, it is just a matter of browsing to see the content of the report.
To avoid such situations, web-based interactive, responsive reports should come with a proper authentication mechanism (if these reports are not public) that allows only authorised users (with a username and password) to view the content. Today, there are many technologies available to create a secure environment. The integration of a secure environment will give rise to the next generation of interactive reports, which are based on collaborative information. This is where investors in a particular bank could log in to a portal containing their investment profiles, reports, news, and information shared by the bank with fellow investors. The portal could even serve as a forum on which investor views and information could be shared.
Are we ready for this next generation of investment reports?
Sri Lanka’s investment community has been relatively slow in adapting the technology for interactive reports. Technology helps generate more intuitive reports, as well as features that could be used by broker firms or investment banks to maintain connections with their clients. Even in developed capital markets, interactive reports are yet to gain widespread popularity, but investment banks are actively attempting to promote the concept as a competitive tool. Thus, this would be a wonderful opportunity for Sri Lanka’s capital market players to be proactive and start providing more interactive reports. It will spark a stronger, more positive attitude among investors, especially foreign investors, about the local market and its players.
It is always better to keep investors connected with the bank. A more knowledge-empowered investor will not only invest wisely, but also invest more. Interactive reports are as yet in infancy, and so Sri Lanka’s capital market players have a good opportunity to devise new tools and use their own research in such reports.
However, this can be challenging. To publish such reports, there are a few elements that need to be integrated into a single reporting platform. Following this, the information can be viewed at any time and almost anywhere, and firms could play around with the report and see how the investors’ view could be reflected using real data. However, the real technology will be in the strong software platform powering these reports, and this back-end should be connected to the respective organisation’s central database and other data sources. This type of platform can be built from scratch, targeting all user requirements. Some organisations prefer to use existing platforms, customising them according to their requirements. Microsoft SharePoint is one such popular platform among investment banks, as a content management system. It provides great flexibility and useful features, and can be enhanced to deliver high-quality, interactive reports. SharePoint also has a cloud version, which would provide unlimited processing power and storage, as well as security, which is vital. This cloud is also managed by Microsoft; therefore, banks no longer need to worry about maintenance or security. Another popular platform is EidosMedia, which is even used by the Wall Street Journal.
Although high-end interactive reports are backed by a significant amount of technology, they can be cost-effective solutions for Sri Lankan firms. Open-source content management systems that support concepts such as responsive reports can be the starting point for local firms, whereas adding the interactive nature will be an incremental process. Although Sri Lanka’s market is small at present, it does not lack in potential. Liquidity, backed by accessibility to information, is a key aspect that attracts investors. This is where responsive, interactive reports can make a difference.
Are interactive, responsive reports a must?
Not at present; but this would change in a few years. However, publishing such reports will differentiate an investment bank from its competitors, and encourage and attract investors to the banks that provide these features. Although interactive reports are still in an introductory phase, investment firms are considering the option and preparing the infrastructure in order to stay ahead of the competition. Today, it is connected reports and we do not know what tomorrow will bring, but whatever comes, we believe it will be based on interactive, connected, and responsive systems. Therefore, organisations are vying to get there first and be prepared for the next wave of innovation.
Smart devices have become popular nowadays, and internet access via smart devices is showing rapid growth. People are looking for a connected solution, and smart devices have changed the way they access information. Investment banks are trying to capitalise on this feature by providing online applications, more connectivity, and enhanced accessibility, but one area where all investment banks lag is in providing connectivity and accessibility to investment reports. However, all the top investment banks are finally on track to provide responsive, interactive, user-customisable reports, enabling future investors to access more information and allowing them to play a major role in achieving their own analysis. In turn, interactive, user-customisable reports will enable investment analysts to spend less time generating routine reports and more time looking for compelling investment opportunities.
[The writer is Senior Associate Vice President, Quantitative Research – Copal Amba Colombo. Copal Amba is the leading provider of offshore research and analytics services to the global financial and corporate sectors. It has consistently been ranked #1 in the investment research and analytics space by multiple independent customer satisfaction surveys. Its clients include leading bulge-bracket financial institutions, Fortune 100 corporations, mid-tier companies, boutique investment banks, and funds. Copal Amba supports over 200 institutional clients through its team of 2,400 highly proficient analysts. Its 9 delivery centres are located close to its clients and in proximity to scalable talent pools. Its clients have saved over USD1.5 billion over the past 11 years by using its services to enhance front office efficiency. Copal Amba’s majority shareholder is Moody’s (NYSE: MCO). For more information about Copal Amba, please visit www.copalamba.com.]
