INVESTMENT SECTOR
Compiled by Tamara Rebeira
SHAPING INVESTOR FUTURES
Rashmi Peiris Paranavitane tracks emerging trends in investment research
Q: How do you see AI and machine learning influencing investment research and decision making?
A: Artificial intelligence and machine learning can analyse vast datasets, identify patterns and generate insights that would take analysts days to accomplish using traditional methods.
Global investment banks have already begun leveraging AI driven analytics from conducting market trend predictions and optimising trading strategies to utilising alternative data such as social media trends.
The use cases for AI are continuously emerging and evolving, and we are likely to see more companies in the financial services industry leveraging artificial intelligence to gain a competitive edge.
However, while AI provides powerful tools and capabilities, we cannot completely remove human judgement and experience from investment decision making, especially when evaluating qualitative factors, market sentiment and macroeconomic shifts.
There are also ethical considerations. For instance, insights generated from machine learning can be biased if the underlying data contains biases. Additionally, these models may also lack transparency, which in turn creates issues in accountability for investors.
While AI is a powerful tool that firms can leverage, it should be implemented with a balanced approach that includes adequate human oversight, ensuring that investment professionals continue to apply critical thinking and judgement.
Q: How has the role of investment professionals changed with the rise of environmental, social and corporate governance (ESG) investing?
A: ESG investing involves integrating environmental, social and governance factors into decision making. The impact of such investing on the investment landscape has been quite transformative with investors increasingly demanding more than only financial returns.
As a result, investment professionals must understand how environmental, social and corporate governance factors influence potential opportunities and risks.
They need to analyse ESG related information – especially those that are most relevant to the industry, alongside financial metrics – and assess the materiality of these factors on a company’s future performance. Investment professionals must also be able to integrate these assessments into their analysis process.
However, there are certain challenges in incorporating ESG factors into investment decisions. For instance, environmental, social and corporate governance data is often fragmented and qualitative.
Companies may adopt different reporting frameworks and since disclosures are voluntary in several markets, ESG reporting is frequently inconsistent. Additionally, related regulations are continuously evolving, making it difficult to stay abreast of norms.
In Sri Lanka, the integration of environmental, social and corporate governance factors into business models and ESG reporting has been gaining momentum, particularly in sectors such as agriculture. Therefore, it is important for investment professionals to stay updated and informed about ESG principles to remain competitive.
Q: What skills are essential for those who aspire to excel in investment research?
A: For those in the early stages of their careers, it is important to develop a diverse skill set that includes technical, analytical and soft skills.
During this stage, building a strong foundation in technical skills such as financial analysis and modelling, economics and valuation among others is very important. These skills are also typically covered in most finance qualifications.
However, in addition to technical expertise, it is equally important to demonstrate critical thinking and problem solving skills as the financial environment is extremely dynamic. Given Sri Lanka’s evolving financial landscape, staying informed about macroeconomic factors, regulatory changes and industry specific trends is also important.
Another aspect that young professionals sometimes overlook is the importance of soft skills such as communication and presentation. Investment research professionals must be able to articulate their ideas and insights to clients and other stakeholders effectively.
Lastly, over the past decade, developing skills and knowledge in technology, data analytics and ESG has become increasingly important to stay relevant in the competitive investment research field.
Q: So how can young professionals break into investment research and analysis?
A: Breaking into the investment research sector requires a rounded combination of education, relevant skills, practical experience and strategic networking.
During the early stages of one’s career, demonstrating technical skills – such as financial modelling, data analysis and proficiency in industry standard tools – is crucial to capturing the attention of potential employers.
Building a solid foundation in these areas can set candidates apart in a crowded job market. Individuals aspiring to enter into the sector must also look for internships and employment opportunities.
Gaining hands-on experience with companies involved in asset management, investment banking, advisory services or research and analytics can provide invaluable exposure to real world financial decision making. These opportunities enhance technical expertise and offer insights into the practical applications of investment research.
In Sri Lanka, networking plays a particularly significant role in career advancement. Actively engaging with other professionals in the field, attending relevant events and seeking mentorship from experienced individuals can open doors to new opportunities.
Building a strong professional network can provide guidance, support and potential job leads, helping individuals navigate their journey in the investment research sector.
