As a fund selector, Ngan thinks clients should be looking at more defensive investment tools as market uncertainty becomes more pronounced.
She is currently searching for uncorrelated returns and strategies/managers “who can play markets when they go into reverse”. One of the key differentiators, she believes, will be those managers harnessing big data for the benefit of their portfolios.
“People are trying to look at investing in a more systematic way, utilising quantitative aspects within discretionary portfolios. It’s something I am keeping my eyes on, to see if it will be a very big trend here in Asia. Certainly, in Europe, I understand people are further down the road in terms of embracing these ideas.”
Disruption is already a part of our everyday lives, she observes, and big data has the potential to provide fund managers with the inside track on developing financial and consumer trends.
“Fund managers, especially those who are sector specialists, will find it a lot more useful. We want to find managers who are getting their analysts to deepen their knowledge, even in a sector like semiconductors.
“You would probably think why would anyone want to touch a boring sector like that,” said Ngan. “But someone who is a specialist in semiconductors and has grown up and seen how that industry has evolved and changed – and how it is being disrupted today – maybe they can see where that next new trend is coming from.”
Big data is one of the key areas Ngan talks about with asset managers. “I throw that question at them; how important is big data and do you embrace it in your stock analysis process? How are your senior analysts embracing it? I just want to get a feel for the reality of this. “We see a lot of anecdotal data about how money is flowing in and managers are raising money to exploit the opportunity. I see a lot of new funds potentially coming to market trying to use big data, to access information and allow for the creation of alpha.”
However, Ngan believes that fund selectors in the region are uncomfortable with quant strategies. “I find not many people understand quant, even for fund selectors like myself. We need to really sit down and go through quite a detailed conversation with the asset manager to really understand what is the program, what are the variables, how did they write and evolve their model over time.”
The reason quant strategies have not taken off in Asia is because of that complexity, she said. It will take time for the market to evolve. “We are living in an environment where conceptually all these new trends and ideas, like smart beta, need to be scrutinised and given time to show their worth, or for them to be shown as just a fad.”