FirstRain Applies Analytics to Online Management Information
January 28, 2008
FirstRain, a provider of search technology to hedge funds and asset managers, announced today that it has introduced FirstRain Management Monitor, which it describes as a new class of qualitative analytics for professional investors.
“There is a great deal of information on the Web from which it is possible to detect important patterns” that pertain to “quality of management, the tenor of management and whether or not a company executive is on strategy,” said Penny Herscher, president and CEO of Foster City, Calif.-based FirstRain. Though these are all leading indicators of a company’s performance, noted Herscher, an algorithm-based search engine can identify the patterns and trends much faster than a human investor.
“Just as, over the last 20 years, the field of quantitative analytics has grown into a multibillion-dollar industry, we are now seeing the genesis of systems designed to derive analytics from the base pools of qualitative information on the Web,” she added.
FirstRain director of marketing Todd Enders pointed out that qualitative data, such as public statements made by company management, is available online as text-based documents and document excerpts, but they are distributed in a chaotic manner. Hedge fund managers cannot easily obtain the information they need for their investments, according to Enders.
He continued: “The problem that we are solving with the Management Monitor service is, how do you detect and organize all that data so that a portfolio manager can analyze and derive trends that would otherwise be invisible to them?”
The new offering gathers, extracts and assesses comments made by CEOs and other top executives, in both official and unofficial capacities; publicly reported instances when companies, employees and spokespeople declined to comment on company activities and events; and senior management changes. Reports are accessible via the Web and can be customized to focus on individual companies or entire sectors.
The service was created when a large, buy-side institution asked FirstRain to systematically track one company’s management commentary for them, explained Herscher. A portfolio manager at the buy-side firm had been monitoring such information manually, conducting key-word searches and inputting data into an Excel spreadsheet. “We realized that we could write an algorithm along with analytics to detect these facts and provide them to our customers,” she said.
Management Monitor often helps to identify the general consensus on a particular company or sector and can reinforce an investor’s belief in a contrarian investment strategy, according to Enders, who said that online chatter can distract investors from true value and the key factors actually in play.
Privately held FirstRain, which has offices in New York and a research and development facility in Gurgaon, India, has 180 employees and boasts over 600 clients, including ING Investment Management, Lehman Brothers, State Street Corp. and Tudor Investment Corp. Its backers include Oak Investment Partners, Ampersand Ventures, Diamondhead Ventures and Split Rock Partners. Other data-mining technology companies serving the institutional community include Zug, Switzerland’s Asset4, New Brunswick, N.J.-based Connotate Technologies and Monitor110 in New York.
