Traditional asset managers have not recalibrated news analytics to include data from social media sites like Twitter, although are expected to in the future, a conference has heard.
Speaking at the Alpha Innovation Required (AIR) Summit in Fort Lauderdale on Wednesday, Armando Gonzalez of news analytics provider RavenPack, said institutional investors had shown little aptitude to incorporate Twitter data into trading strategies despite a growing number of products offering the function.
“We don’t know of any institutional clients that are trading based on Twitter,” he said. “Twitter is still in its infancy for trading, but I believe this will be one of the most important advances in the financial services space in the next decade,” he said.
The social media site has more than 100 million active users, including traditional news outlets themselves, but the buy-side has largely remained reliant on established outlets like Bloomberg and Reuters to source news that affects trading.
“Twitter [posts] cover many events, but not many that are related to stock and economic indicators,” Gonzalez said.
Despite traditional asset mangers’ reluctance, a number of hedge funds have incorporated social media posts to arbitrage information released on Twitter ahead of wider coverage in traditional media.
One such fund, Cayman Atlantic, launched last year and uses Twitter as a primary source of information upon which trading decisions are based, although the system is not fully automated and all trades are executed with portfolio manager approval.
The AIR Summit brought together innovative companies and the buy-side to explore new ways of finding alpha for asset managers.