I recently stumbled upon an advertisement of BlackRock’s Advantage Series (the link is to the German webpage that I was directed to, as I could not find a 100% matching English webpage. There is an English product page, however, where you can download an Advantage Series guide after login).


According to the German webpage, the Advantage Series is combining “technology, big data analysis and responsible investing” in the form of a systematic investment approach. The idea behind the investment approach is to infer profound and timely insights into financial markets and individual companies through the use of new and innovative data sources that go beyond traditional financial data. Some examples mentioned on the webpage are:


  • thousands of investor blog posts that could reveal insights into current and future perspectives of individual companies
  • comprehensive weather data including data on changes of atmosphere and oceans in order to better predict the impacts of droughts, hurricanes and other extreme events
  • product and employer reviews in social media channels that reveal insights into the attractiveness of companies and products
  • booking data that shows trends in traveling and helps to forecast future revenues


And as additional icing on the cake, even social and ecological footprints of companies are taken into account, where controversial weapon companies or any companies that violate the principles of the UN Global Compact are excluded.


Sounds pretty much like the future of investing has already arrived, right? Well, I definitely support a data driven and systematic investment approach. Let me nevertheless give a word of caution though. New sources of data may very well imply that we have more information at our disposal. But it is not about how much information we collect, but about the conclusions that we draw from it. In my opinion the most important benefit of systematic investing is that it represents a framework where ideas can objectively be tested and evaluated detached from human biases. Take, for example, systematic value investing: you can test whether such a strategy would have worked over different regions, asset classes and time periods. Only if a trading strategy is sufficiently tested with empirical data we should have faith that it will work out-of-sample, too. With such new and innovative data sources as mentioned in BlackRock’s Advantage Series you basically can be sure that any empirical validation could only have been done on a very limited time frame. Of course, in the financial industry we always should pursue new investment ideas and investigate the usefulness of new sources of data. But I think we also should be very humble and strict about when to push new concepts from research to production. At least when we do not explicitly state the experimental character of such innovative strategies and the risks that come along. It is real clients’ money that we are trading, and overselling is a dangerous way to go.