Social media influences investment decisions, shows research
The use of social media in investment management is influencing decision-making according to research studying the impact of asset managers’ social media presence on asset owners.
Research carried out by Greenwich Associates towards the end of 2014 showed nearly a third of asset owners made an investment decision or recommendation based on social media output.
A third said information from social media also led to discussing a specific topic with their investment consultants.
The survey showed receiving timely news and industry updates was the most common reason to use social media, with 44% suggesting they sought educational content to be better informed on investments.
Some 36% used social media platforms to research asset managers, with a third seeking recommendations for investment products.
Greenwich Associates managing director, Dan Connell, said asset managers should consider social media strategies given its impact on investment decisions and usefulness in distributing messages.
“Knowing decisions can result in the allocation of hundreds of millions of investment dollars, it is certainly notable that social media platforms are more often playing a role in achieving institutional investors’ workflows,” he said.
Overall, LinkedIn was the preferred source of information with 85% of those using it doing so at least once a week.
The study showed geographies different on their use and consumption, as European institutions preferred LinkedIn, the plurality in US asset owners leaned more towards Twitter, while those in Asia Pacific preferred YouTube.
Facebook, while growing in use as a news source, was still not deemed as a professional tool by investors.
However, 78% of institutional investors in Asia Pacific said Facebook was used at least once a month as a source of financial information, compared to 23% in the US and 17% in Europe.
“More investors in Asia cited using social media sources in the past month than traditional financially oriented news websites,” the paper said.
There was a strong split between the type of institution engaging with social media, with public and private pension funds falling behind insurance companies and endowment funds.
However, Greenwich put this down to a number of regulations restricting corporate pension fund usage of social media.
“Social media was originally developed to help people communicate with one another,” the paper said.
“While this still remains the primary goal of most major social media sites, the application of social media to financial services yields different priorities.
“Asset managers looking to attract investment from [institutional investors] should consider the nature of their social media presence.”
However, the research firm warned a social media-savvy asset manager would fail if content was sub-par.
“While the importance of fund returns is paramount, the impact of content that is unique, insightful, and ideally, actionable can be significant,” it added.