Big data making public markets too efficient

At PDI’s Capital Structure Forum, delegates heard about the profound impacts on investing of the “fourth industrial revolution”.

Private markets stand to benefit as investors seek refuge from the revolution in big data, which is making public markets so efficient that it’s becoming ever harder for investors to make money.
Matthias Kirchgaessner, head of research at PLEXUS Investments, pointed out that 90 percent of data in existence today is two years old or less and machines are now able to mine algorithms and perform the job previously done by analysts. As data and artificial intelligence grow at a rapid rate, public markets are becoming increasingly efficient.
“We can invest into liquid or private markets and liquid markets have become very difficult for us,” said Patrick Stutz, chief investment officer at Bayshore Capital Advisors. “But we see big opportunities in private market debt due to the withdrawal of the banks.”
He added that the opportunity going forward was to “target anything that is inefficient – private debt, private markets generally, the small end of the market and emerging markets”.
In a private market context, new technology has proved largely helpful so far according to Simon Champ, chief executive officer of PSC Eaglewood. “Most of what we’re seeing today is enabling technology and that can be good, for example in matching small businesses with suitable lenders.”
He added that “tectonic regulatory  shifts have created rock pools of value” for investors as banks are forced to pass on good small loan opportunities as they no longer suit their cost structures.