Franklin Templeton Investments is expanding its push into data science, signing a deal with a technology platform called Elsen that will allow portfolio managers with — and without — quantitative experience to discover new insights and investment strategies from financial data.
“The challenge is to manage data from hundreds of vendors and make that data usable,” said Chris Pham, senior vice president of data management and data science at Franklin. She added that employees on Franklin’s investment, research, and analytics teams will use the platform to mine data for investment decisions.
Elsen developed its web-based systems to allow portfolio managers to easily access and work with their own data, as well as data from external sources, that they can then use for research, risk analytics, and back-testing investment models, among other functions. Last year, for example, Elsen developed a product in conjunction with Thomson Reuters that lets users analyze Thomson’s and other third-parties’ financial data, as well as other alternative data.
“This allows non-tech folks to leverage alternative data without spending a ton of time at it,” said Zac Sheffer, co-founder and CEO of Elsen. Everyone at a given firm using the systems can access the same data, making insights available across teams that work separately, he added.
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To Silicon Valley, the importance of data to financial firms is an investment opportunity.
Last year Hyperplane Venture Capital, a venture firm in Boston that specializes in machine learning and data companies, led a $2.4 million investment in Elsen. Hyperplane’s Jack Klinck, who founded State Street’s Global Exchange data and analytics business, is chairman of Elsen’s board.
Franklin’s deal with Elsen grew out of FinTech Sandbox, a Boston-based nonprofit that provides startups with data feeds and other support. Franklin is one of the accelerator’s sponsors.
Traditional active asset managers have come under fire from alternative investments, cheaper index providers, and quantitative firms, including those developing increasingly popular factor-based, or smart beta, funds. Like Franklin, many are racing to catch up as the line between fundamental and quant research continues to blur.
Franklin has been losing assets for some time. In its first quarter earnings, the company reported that assets under management were $649.9 billion as of December 31, 2018, down 9 percent during the quarter. Net outflows accounted for $7.3 billion of the asset decline. Between December 31, 2017 and the end of December 2018, Franklin’s assets declined by almost 14 percent.
Meanwhile, traditional firms have been struggling to tap into the growing amount of data that they collect every day on the markets and their customers, as well as how to integrate innovative new sources that can lead to alpha, or excess returns.
Franklin has also been making other moves to better compete, including acquiring alternative credit firm Benefit Street Partners, which is expected to close February 1, and Random Forest Capital in March. Random Forest invests in non-bank, peer-to-peer lending investments using machine learning techniques. With the Random Forest purchase, Franklin acquired data science capabilities, including a scalable cloud-based infrastructure.
In February 2017, Franklin announced it bought quantitative global macro firm AlphaParity.