How investors are using human insights to fuel faster and smarter decisions

A shifting investment research landscape

Because of this, investors are often left unable to find the signals in the noise and miss opportunities to generate alpha or overlook risks – even with their tried and tested strategies. Research budgets have also been squeezed in response to regulatory shifts at a time when the industry was already feeling the pressure from declining fees. 

All this has fundamentally changed what investors need from their research providers. They are now looking for research that truly adds value to their processes and can be seamlessly integrated into their workflows. Above all, they are looking for research that is timely, relevant and rich with insight that is hard to find elsewhere. From thematic investing to assessing company exposure to macro risks, investors need coverage that is broad but can equally delve into niche sectors or emerging companies. The overarching goal is to maximise efficiency and make investment decisions faster and with greater conviction.

What we are seeing in turn is a shift as investors realise that the sparks of information that can make or break an investment decision often reside inside people’s heads. These experts have extensive experience in their field or intricate knowledge of a company that has been obtained over many years. Having developed their skills over multiple disciplines, they offer first-hand perspectives on a range of scenarios that enable investors to understand the meaning in data. 

Forum defined the expert transcript category for research analysts and has grown into the biggest archive of expert interviews in the world. Combined with Maps, Third Bridge provides a deep exploration of global value chains that uncovers and visualises industry and market connections in ways never seen before. Innovation will continue as we carefully listen to our clients’ research needs.

With a strong understanding of key performance and economic drivers, value chains and market trends, Forum’s independent investment research team is able to surface the human insights that may confirm a bias, inform a new opinion, or flip the script entirely. 

Forum use cases across all stages of the investment cycle

Equity:

• Develop a diagnostic roadmap for initial analysis and evaluation of a sector 
• Understand the strategic position of a business in early-stage research, particularly in complex or fast-moving industries 
• Obtain a deep understanding of customer purchasing behaviours, competitor activity, cultural issues, and governance and management risks to a business 
• Assess short-term investor concerns about a company
• Understand historic and current trends, or contrarian viewpoints, to build a perspective on an industry over multiple cycles
• Understand the implications of macro, regulatory and private company moves on portfolio companies
• Spot investment opportunities before they are priced in by the market
• Identify and act on industry trends and company developments as soon as they surface
• Monitor portfolio holdings to gain insight on risk factors and opportunities

Private equity:

• Uncover emerging themes and high-growth sub-sectors investors may not have heard of
• Identify relevant companies to target
• Learn about a company or sector’s TAM, growth drivers and competitive dynamics, as well as its purpose and/or value proposition
• Help define an investment thesis and identify potential risks/due diligence areas
• Identify red flags and develop conviction early in the investment cycle
• Identify potential industry advisors to support due diligence 
• Improve knowledge in preparation for management meetings
• Discover operational best practices to drive value for portfolio companies
• Identify and carry out due diligence on potential bolt-on opportunities 
• Stay informed on latest developments and trends affecting portfolio companies and key competitors 
• Gain insights into potential strategic purchases for portfolio companies

Credit:

• Learn about the market dynamics and competitive positioning of an issuer
• Uncover potential structural, cyclical or idiosyncratic issuer risks in real time
• Gain historical perspectives on how situations have played out in the past and potential restructuring risks
• Quickly understand the business quality, competitive positioning and market dynamics of primary issuances 
• Obtain financial and operational insights to revisit potential secondary investment opportunities stemming from market dislocations
• Understand cash flow drivers and how to think about potential collateral or asset values
• Understand portfolio exposure to macroeconomic changes or events 
• Track market trends and fundamental performance of existing investments
• Identify stress points in the value chain
• Understand the impact of special situations, economic trends, management changes and any issues – or potential issues – with a company’s underlying business
• Cross-check the story portrayed by management, the sponsor or other market participants

How Forum supported idea generation at a global hedge fund

Idea generation in French retailing

A USD 50bn+ global hedge fund was using Maps and Forum for idea generation on large-cap European stocks. In February 2022, the client was examining the impact of inflation, starting with the food retail market.

The research process began with Maps to understand the value chain of different product families and identify producers across global supply chains. Over 50 different Maps and Forum transcripts were analysed to understand in detail the relationships between suppliers and retailers, sales trends and pricing dynamics. With the support of Connections, Third Bridge’s expert network service, the client was also able to interview relevant industry executives with intricate knowledge of the key players, and the challenges and opportunities they were facing. 

At the time, it was widely reported that food retailers across Europe were not passing on their increased costs to consumers, but a number of industry specialists interviewed by Forum sector analysts suggested that single-digit inflation-driven price increases were imminent. 

Based on the differentiated insights that were emerging across Forum Interviews, the client decided to explore which food categories were most affected. They discovered a plethora of transcripts that investigated whether some, such as proteins, were able to pass on inflationary pressures, and how they were positioned in the increasingly uncertain environment. The client learned that inflation in the proteins sector was indeed much higher than most other categories, with specialists commenting that costs would ultimately have to be pushed through.

Using Maps to analyse the full manufacturing chain, the client then navigated through more than 10 Forum Interviews on the French retail market to uncover further narratives to round out their investment thesis. thesis. In particular, they gained information and qualitative insight on the competitive dynamics and macro forces impacting the hypermarkets. The output of the work culminated in a successful long Carrefour/short Casino position for many months. 

Idea generation in the sportswear category: Puma vs Adidas

A USD 50bn+ global hedge fund was using Maps and Forum for idea generation on large-cap global sportswear stocks. In November 2021, the client downloaded over 15 Forum Interviews conducted across three continents discussing supply chain delays, the competitive landscape and cost challenges. Third Bridge’s Connections team also identified hundreds of industry experts for private consultations to understand operating margin expansion opportunities and pricing dynamics. 

Interviews with former executives of major footwear brands discussing latest channel trends provided the foundation for a new investment thesis on Puma and Adidas. The client discovered that channel mix is crucial and that third-party sales were driving Puma’s growth. This was particularly true regarding its partnership with Amazon, which benefited from COVID-19 tailwinds. 

In contrast, Nike and Adidas had been increasing their D2C sales since 2019 and as a consequence of becoming over-distributed started to withdraw from some third-party wholesalers. Puma had in turn gained a competitive advantage, as the company was able to claim the wholesale shelf space left by its rivals. 

This was the first time that Puma’s supplier-first approach vs Nike and Adidas’ retail-focus strategy had surfaced, resulting in the client taking a long Puma/short Adidas position. 

How investors are optimising their research process to make smarter decisions

Forum has set a high bar with its cutting-edge search and personalisation capabilities following a raft of recent enhancements. This comes as many hedge funds have started benchmarking the quality of their research providers in more sophisticated ways, including how they access investment research. Searchability and a seamless user experience are critical to investors. The advanced technology behind Forum means they are always able to find high-quality research that meets their needs wherever they are.