BST Awards 2021: Best buy-side portfolio analysis tool—Essentia Analytics

OVERVIEW

Essentia Insight is a buy-side focused tool that combines data analytics, human coaching and automated “nudging” to drive measurably better decision-making across the front office. 

Typical user-firms: Active managers of public equity portfolios and allocators of separately managed accounts to such funds.

Over the last three years, annual recurring revenue (ARR) has grown by more than 50% year on year, and the firm has more than doubled its client base over the same period.

WHAT’S NEW 

Sector Relative Analysis: Whereas a given portfolio will often be benchmarked against a broad index when reporting performance, unpicking which sectors the managers are most skilled at requires benchmarking each position against the relevant sector benchmark. Essentia’s sector relative performance mode is designed to make it easy for teams with sector-based responsibilities to see clearly what is working and what is not.

Essentia Insight Enterprise: Designed to meet the needs of organizations with five or more equity strategies and in-house analytics expertise, Essentia’s Insight Enterprise package combines access to Essentia Insight’s suite of 40+ behavioral analytics with an itemized pricing model. In 2021, Essentia launched a series of Behavioral Alpha Workshops for investment teams, focused on mitigating behavioral bias, leveraging cognitive diversity, and improving decision-making. It also introduced its “nudges,” personalized, automated notifications designed to mitigate behavioral bias and encourage better decision-making. The firm tested the efficacy of its nudges across a range of managers and found a 1.6% difference in annualized relative performance between those who engaged with nudges and those who did not.

WHAT’S TO COME

Essentia plans to significantly increase the scale at which its platform can ingest client-specific contextual data, including trade tags and quant scores, for inclusion in its analysis. This will reduce friction in the user experience, while making it easy for clients who use quant, ESG or other scores to prove their efficacy and understand the impact of human override. The firm also intends to upgrade its nudge capabilities to enable greater flexibility and precision, and to make it possible for nudges to be used with managers of any asset class.

WHY THEY WON

The desire to understand exactly why portfolio managers make the decisions they do is not new across the buy side, but it is fiendishly difficult to achieve without technology. Essentia has been pushing the boundaries of behavioral analytics for a number of years now, which has been rewarded by a steady flow of high-profile clients and category wins in these and other awards programs. Its new Sector Relative Analysis tool and nudges function will no doubt prove popular with the buy side for obvious reasons.