Essentia Analytics
Empowering Professional Investors through Data Analytics

All professional investors share a fundamental problem: they are selling skill, but getting paid for performance. However, performance is not a measure of skill—it’s a measure of outcome. “The fund management space is increasingly ‘survival of the fittest,’” says Clare Flynn Levy, Founder and CEO, Essentia Analytics. Assets are flowing into passive funds at a rate of knots because human managers are struggling to justify their fees through consistently superior performance. That is affecting margins and fuelling consolidation in the industry. But Essentia, a Notting Hill, London based company’s view is that it is possible for certain active fund managers to consistently outperform passive funds and net of fees. “The only way to do that is to focus on improving the investment process, honing investment skills and providing investors with proof of value added,” she adds.

In order to help fund managers improve performance, Essentia focuses on understanding the full context in which investment decisions are being made, and measures which aspects of the investment process add the most value. “Improving skill requires a data-driven feedback loop. That’s what Essentia is,” remarks Clare. The company offers a cloud-based software solution that uses behavioural data analytics to help professional investors make more skilled investme n t decisions. It enables fund managers to capture richer data about both their own behaviour and its context, turning trade, market and biometric data into actionable, personal insights. “The result is a simple, accurate, continuous feedback loop–the same sort that professional athletes use to achieve excellence,” she adds. “Like many industries, capital markets are rapidly exploring how they can derive value from big data analytics,” says Clare. For many years, capital markets have been building a wealth of rich, structured, quantifiable data about markets, customers, behaviors and trends.

“The sector is starting to explore how this data fits together, and to uncover commercial benefits,” she adds. Essentia is all about making it easy for professional investors to use big data analytics and uncover commercial benefits that affect them directly. “We are uniquely positioned to do this because we are ex-fund managers, neuroscientists and world-class technologists: people who have an innate understanding of the challenges professional investors face, the credentials to break new ground in applied behavioral science, and the technical chops to do it in a secure, scalable and user-friendly way,” sates Clare. In essence, the company’s scientists are continuously building a platform that explores the relationship between a fund manager’s investment history, the market context, the investment process and indicators of the fund manager’s physical and mental state at the time these decisions were made.

In addition to analysis of historical trade data, Essentia offers portfolio managers and analysts a productivity tool that helps them organize their investment ideas while collecting data about the intent behind, and contexts surrounding those ideas. By connecting data on the process with data on the outcome, the company is able to show its users what is working and what isn’t, as well as enable them to set alerts to help stay focused on their investment goals. “We use big data technology to identify not only where correlations exist between these data sets, but also where those correlations are most meaningful,” says Clare.

Being at the cutting edge of technology, neuroscience and big data, Essentia is challenging many of the commonly held paradigms in the investment industry. “Going forward, we will follow our vision to create technology that helps people who make frequent investment decisions understand how to maximize their return on energy expended in that context,” she concludes.