One of the more famous one-liners in golf history is said to have occurred when Ben Hogan was asked the key to understanding a perfect golf swing. “The secret is in the dirt,” Hogan said. One could say the same about Big Data’s role in modern investing. Identifying the right data in a haystack of it, and applying the proper analysis to it, takes commitment and hard work. Analysis is a key tenet of what drives investor success at Standard Life Investments, and it will play an important role at the highly anticipated Ryder Cup, in September, which pits the best golfers from Europe against the best from the U.S.
With its focus on sustained delivery of world-class performance and its ability to ÀQG SRWHQWLDO WKURXJK LQWHOOLJHQW DQDO\VLV 6WDQGDUG /LIH ,QYHVWPHQWV LV D QDWXUDO ÀW DV WKH ÀUVW :RUOGZLGH 3DUWQHU RI 7KH 5\GHU Cup, the biennial match play event that will take place at Hazeltine National Golf Club, in Chaska, Minnesota. Team captains Darren Clarke (European Team) and Davis Love III (U.S. Team) will look to data analysis to help determine who plays on their teams, whom WKH\ ZLOO SDLU WRJHWKHU RQ WKH ÀUVW WZR GD\V LQ foursomes and four-ball, and to help shape overall strategy.
Analysis part of strategy
As the head of the European Team, Clarke is keenly aware of the role data and analysis will play in his decisions. “If you’re not analyzing the data available at the moment, then you’re putting yourself behind the eight-ball,” says Clarke. “For example, you’re looking for the guys who are consistently holing putts from that 3- to 10-foot range, because those are very important in match play. Analysis of data is also a vital ingredient in getting our pairings rightly matched up.”
Love III recalls a time in his own experience as a player that could come in handy at the helm of the U.S. Team. “When Tom Lehman was the U.S. captain in 2006, I had to tell him not to pick me because I was hurt,” he says. “To prove to himself that I was, he’d go out and watch me play. I’d see him out there trying to avoid being seen by me. Now, if a player comes to me and says they are hurt or recovering from an injury, I can go look at his performance data. For example, I can look at ball speed he’s generating off the clubface and compare it to times when he was healthy.”
Both captains agree that the younger players they will be leading at The Ryder &XS DUH YHU\ DWWXQHG WR WKH EHQHÀWV RI using data and analysis to improve performance. However, they also recognize there’s a right way to go about discussing data analysis with players.
“As a team leader, you don’t want to tell players that their performance is weak in a certain area so they should be working on that part of their game,” says Love III. “Today’s players will already know that. As a captain, you’re more likely to use it to ERRVW FRQÀGHQFH ¶/RRN DW \RXU QXPEHUV You’re playing great. Just relax and go play, \RX·OO EH ÀQH ·μ
Clarke and Love III agree that part of the challenge in making decisions that will affect WKHLU WHDPV LV ÀQGLQJ D EDODQFH EHWZHHQ their instincts and the most telling data. Some data is well-constructed, but much of it is just noise. And even good data is of limited value unless you can properly analyze it. Standard Life Investments faces a similar challenge on behalf of investors, but its deep knowledge and expertise help sharpen its focus on applying sophisticated analytical approaches to tease out the true relationship between variables.
“A lot of the work that we do is trying to identify deeper fundamental relationships EHWZHHQ HFRQRPLF LQGLFDWRUV ÀQDQFLDO indicators and asset returns,” says Jeremy Lawson, Chief Economist, Standard Life Investments. “We think about how the correlation structure might be changing over time, and then we think about what that means for the future. If we think a potential investment could be undervalued, we think about how can we take advantage of that.”
Lawson and his colleagues at Standard Life Investments have recognized that it’s necessary to deepen the tools and indicators they use to drive their thinking on global markets and the outlook for returns. For example, over the past few years it has become more accepted that the economic-growth data that FRPHV RXW RI &KLQD LV ÁDZHG DQG GRHV QRW factor in enough volatility. As such, it’s not a very reliable guide to how quickly China’s economy is growing.
“We’ve taken hundreds of economic and ÀQDQFLDO GDWD SRLQWV SXW WKHP WRJHWKHU DQG found a way to extract an indicator of China’s economic activity,” says Lawson. “We believe this gives us a more reliable real-time indicator of how the economy is evolving. For example, we recently noticed that the economy slowed in 2015 much more agJUHVVLYHO\ WKDQ RIÀFLDO GDWD LQGLFDWHG 0RUH recently, with stimulus that has been put in place, we’ve been able to track improvement in those underlying indicators.”