Inside the Hive, we’re committed to a clear purpose: drive the evolution of our investment management and advice propositions by blending innovative quantitative investment research, technology and data science, market insight, and a profound understanding of human behaviour through the behavioural finance lens. We aim to enhance our investment management business, technology and client insights to not only meet but exceed the expectations of our clients in an ever-evolving financial landscape.
To develop our internal research capabilities, we have collaborated extensively in the industry to ensure we remain relevant in the market. Our close connection with research brokers and academia (through our university relationships and sponsored research projects), as well as with global research providers and asset managers, ensures that we are at the forefront of research and trends in the industry from technical, academic and practical perspectives.
Academic research with machine learning
An example of our close relationship with universities can be seen in our collaboration with Stellenbosch University in the context of machine learning. Machine learning is a rapidly growing field that offers many potential applications in investment management and related fields in financial services. Stellenbosch University has committed to developing its capabilities in this field of study through its creation of the School for Data Science and Computational Thinking. It is also an important focus for Momentum Investments as it offers many potential applications for us in investment management, behavioural finance and advice.
Professor Evan Gilbert, a research strategist in the Research Hive, will be seconded on a part-time basis to the university from 2024 onwards. He will supervise research projects at the Master’s and PhD levels on machine-learning-based research topics applied to the financial services context. These projects will provide the basis for academic research papers in local and international research journals, and the insights to drive the impactful application of machine learning techniques inside Momentum Investments.
Understanding investors
Understanding the intricate dance of market dynamics and human behaviour is another focus area for the Research Hive. We delve deep into the realm of behavioural finance, peeling back the layers of psychology that influence investment decisions and which commonly lead to unintended results. Our mission is to decipher market insights through the lens of human behaviour.
We recently held a ground-breaking conference on the future of behavioural finance in partnership with the CFA Society of South Africa and the Global Association of Applied Behavioural Scientists. Renowned experts in the fields of behavioural science and finance, investments, psychology and AI shed light on the ground-breaking possibilities that emerge when these domains intertwine. This event showed that the world is at an interesting juncture.
On the one hand, we’re looking towards a human “empathy” economy where psychology plays a more important role in solving our problems. On the other hand, the era of artificial intelligence (AI) and quantum computing beckons, bringing tremendous opportunity and uncertainty. This remains an important focus area for us. In time, we will be able to make use of effective technology to nudge investors to make more informed decisions aligned with their long-term financial goals.
Retirement reimagined
A final example of the application of effective research is how Momentum Investments has reimagined retirement income planning with the recent launch of a significant enhancement to our living annuity. By allowing clients to hold a combination of a traditional (guaranteed) and living annuity, they must no longer choose between income protection and the growth of their retirement assets.
However, determining the optimal balance between certainty and flexibility in retirement income is a complex problem. The Research Hive has worked alongside Momentum Wealth to model, build and introduce its Income Illustrator tool to assist financial advisors in determining the optimal retirement income solution for their clients. This tool uses a detailed simulation process developed by the Research Hive members for investment purposes to project future income and investment values under different return scenarios and allocations to the traditional annuity. This ensures that the uncertainty of future financial markets is considered in this decision.
The examples of the Investment Research Hive output are a testament to the power of collective vision, relentless innovation and unyielding commitment to continuous improvement. By linking original, research-driven client insights, behavioural finance knowledge and investment management know-how, we’re creating a continuous loop of learning and improving inside our business. This is only possible with a dedicated research capability and a commitment to cross-business collaboration. With unwavering dedication to this goal and a collaborative spirit, we believe that we are shaping the future of investment management and advice today.
