Love finance: smart betas, smart tech, and smart data

By Teamspirit on Monday, 15 February 2016

Why do we love finance this week?

Asset managers are swooping, HMRC is fighting, boundaries are being blurred and maps are being drawn.

'Smart beta' wars
The growing popularity of cheap, index tracking funds is an increasing concern for traditional asset managers.

But now, some have decided to fight back, believing that they can capture business in the innovative edges of the passive investment world by blurring the lines between beta and alpha.

By using so-called smart beta to generate better returns and lower costs, asset managers believe they may have found a clever way to navigate today’s volatile market and tomorrow’s uncertain economic climate.

We love that the jedi of investments have woken up to the value of low-cost indices designed to mitigate exposure to undesirable risk. But we wonder if smart beta is the best way to go due to the inherent exposure risk and the inexperience of houses in managing these types of strategy. Is there the capability bandwidth available?

Cyber-crime makes tax taxing for HMRC
Criminals broke into UK tax returns attempting to steal £100m, HMRC admits.

HMRC said it is aware of cases where criminals harvested log-in details from shared computers used by taxpayers to complete their online returns in order to alter the returns and divert refunds to third party bank accounts.

Last year alone the tax office checked 3.4 million returns and identified 17,000 attempts to claim almost £100m in bogus tax repayments.

We love that crime has been stopped in its tracks. But we wonder where the liability lies if fraudulent tax returns are used to generate repayments? Is the money just written off, does the person whose tax details were used have to prove their innocence, or even pay the money back?

Wearable payments startup FitPay secures $3.1 million
Growth in the integration of wearable and financial services continues as another fintech startup secures seed funding.

FitPay, the San Francisco-based startup, has developed a SaaS that allows wearable device manufacturers to add contactless payment capabilities using the firm's Trusted Payment Manager platform (NFC) technology, combined with card network tokenisation to interact with point-of-sale terminals at retail locations.

We love that innovation is happening quickly. But we wonder whether the speed of finance innovation is outpacing the wearable tech space - the growth of the Apple Watch is hardly staggering, as the share price attests.

Financial cartography
The demand for big data solutions continues, but questions about the relevance and value of data against commercial, operational and marketing objectives still loom large.

For the past few years we’ve been following Dr. Kimmo Soramäki and his work on the utilisation of data to better map outcomes and predict future market issues.

He argues that data connectivity can help draw maps of the uncharted territory of market volatility and corporate risk via customer behaviour rather than rational cause and effect cognitive models.

We love that data can help improve the visibility of possible bubbles and questionable corporate decisions and behaviour. But we’re keenly aware there’s a difference between knowing something will happen and doing something about it.

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