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Investment skill and the research process

The research process is the first building block in the investment process and a key metric of investment skill; it is where ideas are generated and fight for a position in the portfolio. The importance of research is undoubted. However, what is the relationship between successful decision making in the research process and the ultimate goal of alpha generation?

Using the Inalytics Peer Group, we uncover the relationship between decision-making success in the research process and alpha generation. This paper furthers our understanding of investment skill and reveals why it is essential for asset owners to assess the effectiveness of the research process in conducting due diligence. For asset managers, it provides a new way to analyse their investment process when it comes to idea generation and alpha generation.

What evidence have Inalytics used?

This analysis of the importance of the research process uses the Inalytics Peer Group, our proprietary database of active equity portfolios, 370 of which had sufficient length of data available for inclusion in this study. These portfolios represent a broad range of mandates by geography and region, as well as by market capitalisation and style tilts.

Findings were complemented by a recent review of 26 fixed income credit portfolios. Although the sample is small, the results remained remarkably consistent.


Download the full research paper below to view the results of our analysis on the link between a successful research process and alpha generation.

Contact us for further information about how Inalytics analyse portfolios and decision making to improve the investment process and help select skilful portfolio managers.


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