Essentia Analytics, which provides behavioral data analytics and guidance to identify and address thinking biases that impact investment performance, plans to increase headcount and accelerate research and development as a result of ‘an investment by Northern Trust.
Clare Flynn Levy, founder and managing director of Essentia Analytics, told Markets Media that Northern Trust asked her to speak at a conference two years ago and that the relationship ultimately led to Northern Trust buying a small participation.
“They were clearly interested in this space and in the value-added ways of leveraging the data they hold for customers,” she added.
– Essentia Analytics (@Essentia_AI) September 21, 2021
Northern Trust said in a statement that it is adding Essentia’s behavioral analytics solutions to its Whole Office strategy which facilitates client access to new technologies, services and solutions throughout the investment lifecycle. .
Pete Cherecwich, president of corporate and institutional services at Northern Trust, said in a statement: “Essentia’s next-generation data analytics technology enables institutional investors – both asset managers and distributors asset management – integrate data-driven feedback into their investment process. Through our partnerships with Whole Office, Northern Trust clients around the world can access cutting-edge technology, skills and services designed to help them make repeatable and measurable decisions in their quest for alpha.
Flynn Levy said the capital of Northern Trust will allow Essentia to accelerate planned research and development initiatives, evolve the platform and facilitate the onboarding of new clients.
“We’re all focused on continuous improvement, and it’s about being able to continuously improve,” she added.
Flynn Levy founded Essentia Analytics in 2013 after spending a decade as a fund manager. Her previous experience included managing over $ 1 billion in pension funds for Deutsche Asset Management and as the founder and CEO of Avocet Capital Management, a manager of technology hedge funds.
Essentia analyzes the data to create behavioral “nudges” that interact with portfolio managers at or near the time they make investment decisions. For example, the data may show that a fund manager has a habit of holding an underperforming stock for a while and will send a boost if it approaches that time again.
Nudges can be based on when the fund manager can choose when and how often they are received – for example, a brain dump nudge has a blank box to prompt a manager to keep a journal. The second type of nudge is automatically triggered by events such as a change in a stock’s price and allows managers to set the entry or exit level of a given position.
Essentia said that since its launch, its customers have improved their performance after twelve months by an average of 150 basis points of incremental alpha per year.
“The concept of nudge only works if people react, so we need to make it as simple and transparent as possible, and that will be an important area of investment,” added Flynn Levy.
Find out how Essentia’s behavioral analytics, personalized nudges and expert coaching helped a focused, low turnover fund manager unlock over 4% more alpha per year, here: https://t.co/4993HT95tP
– Essentia Analytics (@Essentia_AI) September 7, 2021
Northern Trust will also promote Essentia’s products to its client base of fund managers and asset allocators. Flynn Levy added that over the course of the three years she would expect Essentia to double in size in terms of staff, participate in many product developments and gain new customers around the world.
“The beauty of this Northern Trust partnership is that they had the same vision for us that we have for ourselves,” she said. “Our goal is to become an industry standard and we have a real chance now. “