Bloomberg

Bloomberg

Nithisha CHALLA

In this article, Nithisha CHALLA (ESSEC Business School, Grande Ecole Program – Master in Management (MiM), 2021-2024) presents Bloomberg, which provides financial data, news and analytics for the financial community.

Bloomberg

Bloomberg is a company that provides financial data, news, and analytics to people in finance and other industries. The company was created to address the need for better financial data and analytics access in the business world. Bloomberg’s flagship product is the Bloomberg Terminal, a computer software system that provides real-time data on financial markets, economic indicators, and news.

Logo of Bloomberg
Logo of Bloomberg
Source: Bloomberg

History

Bloomberg LP was founded in 1981 by Michael Bloomberg, a former investment banker who recognized the growing demand for reliable financial information and analytics. The company initially focused on developing and selling computer terminals that provided real-time data on stocks, bonds, and other financial instruments.

Bloomberg’s key innovation, Bloomberg Terminal, was introduced in the early 1980s. This groundbreaking platform revolutionized the way financial professionals accessed market data and news, offering a comprehensive toolset for trading, analysis, and research.

Over the years, Bloomberg expanded its offerings beyond terminals to include data analytics, financial software, and media services. Bloomberg News, launched in 1990, became a prominent source of business and financial journalism, providing timely news coverage and insightful analysis to subscribers worldwide.

In the 21st century, Bloomberg continued to innovate and diversify its business, introducing new products and services tailored to the evolving needs of the financial industry. The company expanded its global presence with offices in major financial centers across North America, Europe, Asia, and beyond.

Today, the company’s commitment to innovation, integrity, and excellence has solidified its position as a trusted partner for businesses, governments, and institutions seeking reliable financial information and insights.

Bloomberg has evolved since its introduction in 1981 and has grown the company from a single location to 176 locations and with 20000 employees. Bloomberg with over 40 years of history, facilitates bottom-up and top-down analysis to better assess potential growth and risk as well as future value across industry, sector, index, country, and region.

Bloomberg covers a wide range of firms across different industries, sectors, and regions. According to Chen (2023), Bloomberg grew to a leading financial company with over 325,000 subscriptions to its professional services, almost 1 million global circulations of Bloomberg Businessweek, and over 150 news bureaus internationally. To support this massive network of financial information, data encryption, messaging, and trading, Bloomberg employs over 4,000 computer engineers around the globe.

Key Components of Bloomberg

Earnings Estimates

Bloomberg provides estimates and forecasts about how companies will perform financially. It collects data from many sources and use it to predict things like earnings and revenue for different businesses.

According to Guttmann from Statista (2022), Bloomberg LP, which operates within the business of information services, news services, broadcasting, streaming, and print, generated an estimated 12.2 billion U.S. dollars. A year earlier, the company’s revenue results stood at 10 billion dollars.

Revenue Projections

Alongside earnings estimates, Bloomberg provides forecasts on how much revenue companies are expected to generate. This helps stakeholders analyze and project the growth and performance of businesses over specific periods.

For example, on June 01, 2023, Bloomberg Intelligence released an expected revenue projection on the AI industry for the next ten years stating “Rising demand for generative AI products could add about $280 billion of new software revenue and the Emerging Industry Could Grow at a CAGR of 42% Over the Next 10 Years”. This helps stakeholders of the respective industry to analyze, project, and invest accordingly.

Forecasts for Key Financial Metrics

Bloomberg’s platform includes forecasts for various important financial metrics beyond earnings and revenue, such as cash flow, profit margins, and growth rates. These forecasts assist in assessing the overall financial health and prospects of companies.

In April 2024, Bloomberg launched a point-in-time data solution that gives quants a competitive edge. By pre-ingesting, mapping, and linking many different data sources together, Bloomberg allows customers to significantly reduce the time needed to generate signals or insights. With this launch, Bloomberg is responding to customers’ need for differentiated, value-adding data with standardized company-level fundamentals, estimates, and deep industry-specific metrics, alongside macro information.

Coverage

Bloomberg covers a wide range of companies across different industries, from large corporations to smaller businesses. This extensive coverage ensures that users have access to comprehensive financial data and insights.

Bloomberg Markets maintains coverage of stocks, bonds, commodities, emerging markets, and forex markets from more than 160 countries. Bloomberg Politics holds the largest news agency in the world in US politics and major global events with more than 1000 reporters and staff. Bloomberg News publishes around 5000 stories daily.

Period

Bloomberg usually provides data with the longest available time period. For example, for Bitcoin data starts in 2010.

Frequency

The period and frequency of forecasts on Bloomberg vary based on user needs and market dynamics. Users can access real-time updates and forecasts as frequently as necessary to stay informed about market changes and company performance.

Bloomberg offers the only cloud-native real-time data delivery option suitable for capital markets use. It delivers B-PIPE through an intra-cloud connection to a managed virtual private cloud on Amazon Web Services (AWS) via AWS Private Link. This low-latency option provides speed, reliability, and security via connectivity that remains solely in AWS.

Pricing

The specific pricing for accessing Bloomberg data is mentioned on the Bloomberg website and it states to have categories like all-in access, limited access, and also has special student access for limited data. The cost likely varies based on the package and offerings selected, which can include different data sets, yearly or monthly subscriptions, and access methods. For detailed pricing information, it is recommended to directly go through the Bloomberg website as it includes very precise information that pretty much caters to all the needs based on the functionality.

Bloomberg charges a fee for its services, usually on a subscription basis. The cost can be high, but many financial professionals find it worth it for the valuable information they receive.

Use of Bloomberg by the Financial Community

Benchmark for Analysis

Professionals rely on Bloomberg’s extensive database of financial data, economic indicators, and market news to conduct in-depth analyses of companies, industries, and markets. The platform provides powerful tools and customizable features that enable users to create detailed financial models, perform comparative analysis, and track key performance metrics.

Market Expectations

Financial professionals use Bloomberg to stay informed about market expectations and sentiment. The platform aggregates market forecasts, including earnings estimates, revenue projections, and economic indicators, allowing users to assess consensus expectations and potential market trends. Bloomberg’s real-time updates and customizable alerts enable users to monitor shifts in market sentiment and adjust investment strategies accordingly.

Earnings Season Preparation

During earnings seasons, Bloomberg becomes an essential tool for financial professionals preparing for corporate earnings releases. The platform’s earnings analysis tools help users interpret financial results, identify underlying trends, and make informed decisions based on earnings reports.

Bloomberg and Tests of Market Efficiency

Academic works

Researchers and scholars leverage Bloomberg’s vast dataset and analytics tools to conduct empirical studies on market behavior, information dissemination, and the efficiency of asset pricing models. By analyzing historical market data and real-time information flow, academics assess the degree to which markets reflect all available information and efficiently incorporate new information into asset prices.

Information Dissemination

One key aspect of market efficiency is the speed and accuracy of information dissemination. Bloomberg facilitates the rapid dissemination of market news, economic data, and corporate announcements to a global audience of financial professionals. Researchers use Bloomberg to study how quickly information is incorporated into asset prices and whether markets efficiently reflect public and private information.

Pros and Cons

Given its history and operations in widely known industries and markets, we certainly need to know the pros and cons of Bloomberg.

Bloomberg provides users with access to extensive financial data and analytics, enabling rigorous empirical studies on market efficiency. Bloomberg’s customizable tools and advanced features facilitate complex analyses and modeling for testing various market efficiency hypotheses. The platform offers real-time updates and historical data, allowing researchers to analyze market behavior over different periods and market conditions.

On the other side, Bloomberg’s subscription costs may limit access to users with limited budgets or academic institutions with constrained resources. The complexity of Bloomberg’s interface and data structure may also present a learning curve for users new to the platform.

Conclusion

Bloomberg’s impact extends across the financial community, serving as a trusted resource for investors, traders, analysts, and corporate professionals worldwide.

Why should I be interested in this post?

According to me, mastering Bloomberg can equip management students with valuable skills and knowledge that are directly applicable to careers in finance, business analysis, and strategic management. It offers a practical way to enhance analytical capabilities, stay updated with industry trends, and build a strong foundation for future professional success.

Related posts on the SimTrade blog

   ▶ Aamey MEHTA Market efficiency: the case study of Yes bank in India

   ▶ Louis DETALLE The importance of data in finance

   ▶ Bijal GANDHI Earnings per share

Useful resources

Bloomberg

Wikipedia Bloomberg L.P.

Statista Estimated revenue generated by Bloomberg LP worldwide from 2015 to 2022

Bloomberg Generative AI to Become a $1.3 Trillion Market by 2032, Research Finds

Bloomberg Bloomberg Launches Point-in-Time Data Solution that Gives Quants a Competitive Edge

About the author

The article was written in May 2024 by Nithisha CHALLA (ESSEC Business School, Grande Ecole Program – Master in Management (MiM), 2021-2024).

FactSet

FactSet

Nithisha CHALLA

In this article, Nithisha CHALLA (ESSEC Business School, Grande Ecole Program – Master in Management (MiM), 2021-2024) presents FactSet, which provides financial data, news and analytics for the financial community.

Introduction

FactSet also known as FactSet Research Systems Inc. is a leading provider of financial data and analytics solutions, catering to professionals in the investment industry. Whether you are a financial analyst, portfolio manager, or student of finance, FactSet offers powerful tools and resources to analyze markets, evaluate companies, and make informed investment decisions.

Logo of Factset
Logo of Factset
Source: Factset

History

Founded in 1978 by Howard Wille and Charles Snyder, FactSet began as a startup aiming to revolutionize financial data analysis. The company initially focused on providing financial analysis software for investment professionals, aiming to streamline data processing and analysis in the rapidly evolving financial industry.

Throughout the 1980s and 1990s, FactSet expanded its product offerings and market presence, catering to a growing demand for sophisticated financial data and analytics solutions. In its journey of growth and expansion, FactSet has made several strategic acquisitions to enhance its product portfolio and expand its market reach.

In 2007, FactSet acquired Market Metrics, a provider of market research and consulting services for asset managers. In 2015, FactSet acquired Portware LLC, a leading provider of multi-asset trade automation solutions for asset managers and institutional traders. In 2020, FactSet acquired Truvalue Labs, a pioneer in AI-driven environmental, social, and governance (ESG) data and analytics.

From its humble beginnings in the late 1970s to its current status as a global leader in financial data and analytics, FactSet has continually evolved to meet the evolving needs of the investment community.

Key Components of FactSet Research Systems

Earnings Estimates

Earnings estimates refer to predictions made by financial analysts and experts regarding how much profit a company is expected to generate in the future.FactSet gathers and provides these estimates, which are crucial for investors and analysts to assess a company’s potential performance.

According to Factset, 2024, the company’s consensus estimates are aggregated from a wide base of contributors and cover 19,000+ active companies across 90+ countries.

Revenue Projections

Revenue projections indicate how much revenue a company is expected to generate over a specific period. FactSet’s revenue projections are based on industry trends, market conditions, and company-specific factors, providing users with valuable insights into sales performance and revenue drivers.

For example, in June 2024, Factset released an expected revenue projection for S&P 500 companies stating “The blended (companies that reported and the estimation of the companies yet to report)earnings growth rate for the S&P 500 for Q4 2023 is 3.2%. It should be noted that analysts are currently projecting (year-over-year) revenue growth for all four quarters of 2024. For Q1 2024 through Q4 2024, the current estimates for revenue growth are 3.5%, 4.6%, 5.0%, and 5.7%, respectively.”. This helps stakeholders of the respective industry to analyze, project, and invest accordingly.

Forecasts for Key Financial Metrics

In addition to earnings estimates, FactSet offers forecasts for key financial metrics such as revenue growth rates, cash flow projections, and profit margins. These forecasts provide insights into overall financial health and performance metrics, helping users assess business strategies, identify growth opportunities, and make informed investment decisions. By analyzing financial forecasts, users can anticipate market trends and evaluate the potential impact on investment portfolios.

Coverage

FactSet covers a wide range of companies across different industries, from large corporations to smaller businesses. This extensive coverage ensures that users have access to comprehensive financial data and insights.

FactSet provides access to 200+ data items, including 100+ metrics across 18 industries encompassing airlines, banking, insurance, oil/gas, and retail. It leverages estimates that are collected directly from the research reports and flat file feeds of 800+ contributors across 55 countries.

Period

Factset has evolved since its introduction in 1978 and in 2023, Factset has expanded its client base to over 7,900 and increased its user base by 6%, surpassing 189,000 users. Factset with over 45 years of history, facilitates top-down analysis to better assess potential growth and risk as well as future value across industry, sector, index, country, and region.

Frequency

The period and frequency of forecasts on Factset vary based on user needs and market dynamics. FactSet incorporates quarterly and annual financial reports from companies, including earnings releases, revenue figures, balance sheets, and cash flow statements. Users can access real-time updates and forecasts based on two categories that are data frequency and update frequency, where they provide quarterly data frequency and an intraday update frequency.

FactSet also includes on a timely basis event-driven updates such as corporate actions (e.g., mergers, acquisitions, dividends) and regulatory filings (e.g., SEC filings), providing comprehensive coverage of market events impacting investment decisions.

Firms and Financial analysts

According to James Chen (2023à, FactSet is broken down into three business units: one in the United States, one in Europe, and one in Asia-Pacific. The business unit located in the United States provides financial solutions to financial professionals as well as domestic financial institutions. The European and Asia-Pacific business units only service financial professionals in the regions in which each unit operates.

As of 2023, FactSet services over 200,000 users in more than 8,000 companies and organizations. FactSet has 37 offices in 20 countries. The company reports it has had a client retention rate of 95% with 43 years of revenue growth.

Pricing

FactSet’s pricing model varies based on subscription plans and user requirements. Students can explore different pricing tiers to access specific data sets, analytical tools, and premium features tailored to their academic or research needs. Understanding FactSet’s pricing structure is essential for management students evaluating the cost-benefit of utilizing its services for financial analysis and research purposes.

FactSet provides its services for a lower price than some of its competitors because the company uses multiple sources to provide its data, which creates pricing competition between suppliers.

Use of FactSet by the Financial Community

Benchmark for Analysis

FactSet serves as a benchmark for financial analysis, offering a comprehensive suite of tools for analyzing companies, industries, and markets. Management students can use FactSet to perform detailed financial modeling, comparative analysis, and valuation assessments, gaining practical experience in fundamental analysis techniques.

Market Expectations

FactSet provides access to economic data and forecasts that shape market expectations. Users can track indicators such as GDP growth, inflation rates, unemployment figures, and interest rate projections to anticipate broader economic trends.

Earnings Season Preparation

During earnings seasons, by leveraging FactSet’s capabilities, users can navigate earnings announcements with confidence, interpret financial results effectively, and make well-informed investment decisions based on fundamental analysis and market intelligence.

FactSet and Tests of Market Efficiency

Academic works

Academic researchers use FactSet’s extensive database and analytical tools to conduct empirical studies on various topics in finance, economics, and investment management. FactSet’s rich dataset allows researchers to analyze market behavior, asset pricing models, and the impact of economic indicators on financial markets. Researchers use FactSet to assess whether asset prices reflect all available information, conducting event studies and anomaly detection to identify market inefficiencies.

Information Dissemination

Information dissemination refers to the process of distributing financial data, market insights, and analytical reports to users within the investment community using FactSet’s platform. FactSet provides real-time market data on stock prices, indices, commodities, currencies, and other financial instruments. Users can access live updates and monitor market movements as they occur, enabling timely decision-making and risk management.

FactSet disseminates earnings releases, corporate news, and press releases from companies within its coverage universe. Users receive alerts and notifications about important announcements, enabling them to stay informed about company developments and assess potential market impacts.

Pros and Cons

Given its history and operations in so many industries and markets, we certainly need to know the pros and cons of the FactSet.

FactSet provides researchers with access to extensive financial data and analytics, and comprehensive financial data coverage across global markets. FactSet provides a user-friendly interface and intuitive features. It has very well-known powerful tools for financial analysis and investment research.

On the other side, FactSet subscription costs may limit access to users with limited budgets or in academic institutions with constrained resources. The complexity of mastering advanced functionalities may also present a learning curve for users new to the platform.

Conclusion

FactSet impact extends across the financial community, serving as a trusted resource for investors, traders, analysts, and corporate professionals worldwide.

Why should I be interested in this post?

As a management master’s student focusing on finance or strategic analysis, understanding and utilizing financial data platforms like FactSet can greatly enhance your skills and career prospects.

Related posts on the SimTrade blog

   ▶ Aamey MEHTA Market efficiency: the case study of Yes bank in India

   ▶ Louis DETALLE The importance of data in finance

   ▶ Bijal GANDHI Earnings per share

   ▶ Nithisha CHALLA Bloomberg

Useful resources

FactSet

Truvalue Labs

Wikipedia FactSet

FactSet FactSet Estimates – Consensus

FactSet FactSet Annual Report 2023

FactSet Earnings Insight

About the author

The article was written in May 2024 by Nithisha CHALLA (ESSEC Business School, Grande Ecole Program – Master in Management (MiM), 2021-2024).

Reuters

Reuters

Louis DETALLE

In this article, Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023) explains everything there is to know about Reuters, the international giant in the data-providing market…

Quick presentation of the company

Thomson Reuters is a leading provider of business information services. As one of the main competitors of Bloomberg, their products include highly specialized information-enabled software and tools for legal, tax, accounting and compliance professionals combined with the world’s most global news service – Reuters.

Reuters is organized in 5 different business units:

Legal Professionals: This business unit serves law firms and governments with research products, focusing on intuitive legal research powered by emerging technologies and integrated legal workflow solutions that combine content, tools and analytics.

Corporates: Designed for corporate customers from small businesses to multinational organizations, this business unit provides its clients with a full suite of content-enabled technology solutions for in-house legal, tax, regulatory, compliance and IT professionals.

Tax & Accounting Professionals: This business provides its customers with research that focuses on intuitive tax offerings and automating tax workflows.

Reuters News: Supplies business, financial and global news to the world’s media organizations, professionals and news consumers through their many platforms.

Global Print: Provides legal and tax information primarily in print format to customers around the world.

Type of people working at Bloomberg (types of jobs)

Nearly 2/3 of Reuters’ employees work in the US, the remaining third working in Asia and in Europe. The careers available at Reuters are therefore numerous and very diverse.

Indeed, the profiles needed by Reuters consists in legal professionals, corporate professionals, tax & accounting professionals and journalists. Thomson Reuters also employs many software designers to help design the Reuters’ terminals, as well as sectorial legal and corporate specialists in order to provide precise and adequate analysis.

Main competitors

As Thomson Reuters’ activities are very diverse, we will classify the main competitors of the firm in respect to the activities.

For Thomson Reuters’ business that consists of software-design, Bloomberg LLP is the most natural competitor in this space with its very famous Bloomber Terminal. The terminal business is built on a fantastic technology platform that provides comprehensive financial information. There are other competitors, such as Dow Jones Industrial Average FX Trader, which have specialized in one type of industry whereas Reuters and Bloomberg remain generalists.

Reuters’ editorial branch’s main competitors would be Bloomberg News, the Financial Times (FT), the Wall Street Journal, and other traditional financial news companies. The same goes for their TV/radio operation (their competitor would be CNBC).

Use of data in financial markets

The explosion of financial data, enabled by the Internet tremendous potential, caused an explosion of demand for financial data. As evidenced in 2006 by the British mathematician and Tesco marketing mastermind Clive Humby’s quote, “Data is the new oil”, the data market seems to be limitless.

In addition, as Bloomberg acquires many of his competitors, such as BNA and BusinessWeek, this contributes to curbing the number of data providers and improving the monopoly of Bloomberg on the data-providing market. Reuters struggles to keep up the pace of its competitor which is very well established in this market.

Useful resources

Bloomberg

Reuters

Related posts on the SimTrade blog

   ▶ Louis DETALLE Understand the importance of data providers and how they influence global finance…

   ▶ Louis DETALLE Bloomberg

About the author

The article was written in March 2022 by Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023).

A quick overview of the Bloomberg terminal…

A quick overview of the Bloomberg terminal…

Louis DETALLE

In this article, Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023) explains everything there is to know about the Bloomberg terminal which is a must-know in finance.

How to use the main functions of the Bloomberg terminal?

One may notice that the keyboard of the Bloomberg terminal is a little strange. Indeed, this keyboard called Starboard, and contains red, blue, green and yellow keys for specific functions in addition to your regular keys.

Functions are unique Bloomberg applications that provide analysis and information on securities,
sectors, regions and more. Each function is accessed by typing in its unique mnemonic (a short, memorable name) and then pressing the key located in the lowest-right sided area of the keyboard.

Let’s review together the different functions of the buttons:

The HELP button is perhaps the most useful button for those just starting out. If you have questions about anything on the terminal, simply press the button once and a Bloomberg specialist will be there to start a live chat with you to resolve your questions.

In order to benefit from the latest news, users can simply type NEWS and press enter to get the latest information on market trends, movements and other relevant news.

Those in the finance industry chat via Bloomberg Messaging, which is essentially equivalent to Facebook Messenger but on Bloomberg. It enables you to send a message to anyone on the device. This means that anyone in the industry can technically contact each other instantly. No need to ask for someone else’s number or find out the best way to get in touch.

Main users of the Bloomberg terminal

Traders, brokers, analysts, portfolio managers, investors and executives are the Terminal’s primary consumer base as they need to access the data provided by Bloomberg easily in order to do their job.

A subscription to the Bloomberg Terminal costs approximately $20,000 a year, but that does not stop its customers from renewing their subscriptions because of its usefulness.

Training webinars

First and foremost, the Bloomberg beginner should work on the document available on Bloomberg website, Getting started on the Bloomberg Terminal, which will give you the main information on the keys and their function.

The best next step to get used to the Bloomberg Terminal is to complete the certification
course: Bloomberg Market Concepts (BMC). BMC is an 8-hour e-learning course that will
provide a visual introduction to the financial markets and covers nearly 70 Terminal functions which is enough for whoever wants to start using Bloomberg.

Related posts on the SimTrade blog

   ▶ Louis DETALLE The importance of data in finance

   ▶ Louis DETALLE Reuters

   ▶ Louis DETALLE Bloomberg

Useful resources

Bloomberg’s website

Capital Markets (BMC) Certification’s website

About the author

The article was written in April 2022 by Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023).

Bloomberg

Bloomberg

Louis DETALLE

In this article, Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023) explains everything there is to know about Bloomberg LP, the international leader in the data-providing market…

Quick presentation of the company

Bloomberg LP is an American financial group specialized in services to financial market professionals and in economic and financial information. Bloomberg operates as a news agency and via numerous media such as TV, radio, press, internet, and books. The company was founded in 1981 by Michael Bloomberg, former mayor of New York City.

In its early days, Bloomberg LP’s activities were only based on the exploitation of a historical database of US Treasury yield curves, bought by the founder to its former employer, the investment bank Salomon Brothers. After that, the company added on its terminals a messaging system, retransmissions of financial assets’ prices and developed financial news flows long before the watershed of Internet.
In 1990, Michael Bloomberg installed his 1,000th terminal.

Type of people working at Bloomberg (types of jobs)

The careers available at Bloomberg LP are numerous and very diverse. The Board’s needs in terms of employees mainly consist of software designers to help design the Bloomberg’s terminals, sectorial financial specialists in order to provide precise and adequate analysis.
Finally, the last kind of profiles that Bloomberg needs are journalists and more broadly, people with great writing abilities since Bloomberg LP produces a huge flow of written articles every day. Bloomberg News for instance (one of many Bloomberg LP’s subsidiaries) has over 10 000 employees which gives an idea of the written flow emitted by the company.

Main competitors

As Bloomberg’s activities are very diverse, we will classify the main competitors of the American firm in respect to the activities.
For Bloomberg’s core business, which is the terminals, Thomson Reuters is the most natural competitor in this space (with products like Kobra, Eikon, D3000). The terminal business is built on a fantastic technology platform that provides comprehensive financial information. There are other competitors, such as Dow Jones Industrial Average FX Trader, which have specialized in one type of industry whereas Bloomberg remains a generalist.

Bloomberg’s editorial branch’s main competitors would be Reuters, the FT, the Wall Street Journal, and other traditional financial news companies. The same goes for their TV/radio operation (their competitor would be CNBC).

Use of data in financial markets

The explosion of financial data, enabled by the Internet tremendous potential, caused an explosion of demand for financial data. As evidenced in 2006 by the British mathematician and Tesco marketing mastermind Clive Humby’s quote, “Data is the new oil”, the data market seems to be limitless.

In addition, as Bloomberg acquires many of his competitors, such as BNA and BusinessWeek, this contributes to curbing the number of data providers and improving the monopoly of Bloomberg on the data-providing market.

Useful resources

Bloomberg

Thomson Reuters

Related posts on the SimTrade blog

   ▶ Louis DETALLE Understand the importance of data providers and how they influence global finance…

   ▶ Louis DETALLE Reuters

About the author

The article was written in March 2022 by Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023).

My experience as a junior financial analyst at ACE

My experience as a junior financial analyst at ACE

William LONGIN

In this article, William LONGIN (EDHEC Business School, Global BBA, 2020-2024) shares his experience as a junior financial analyst at ACE Finance et Conseil, which is a wealth management firm specialized in financial investments.

ACE Finance et Conseil

First, let me present ACE Finance et Conseil. It is a wealth management firm created by Gabriel Eschbach in 2002. It is located in Strasbourg in the East of France. ACE Finance et Conseil currently manages a portfolio of 230 clients who are individual investors. The profile of these investors varies in terms of wealth and investment objectives. Most of the clients of ACE Finance et Conseil are living in the East of France, especially in the Strasbourg area. The ambition of the company is to expand its base of clients at the national and even international level.

Logo of ACE Finance et Conseil.
Logo of ACE Finance et Conseil
Source: ACE Finance et Conseil.

The founder of the company, Gabriel Eschbach, is a graduate student from the University of Strasbourg. Gabriel also attended a program in wealth management at ESSEC Business School. Building on his past professional experience in large financial institutions and insurance companies, he has developed extensive skills and knowledge on financial markets and asset management.

My personal experience at ACE Finance et Conseil

My job was to find relevant information on the firms of interest for ACE. To find such information, I used the Bloomberg Terminal. Beyond the search of information about companies, I also spent time on building a portfolio based on our current knowledge of the market conditions. During my internship, the stock market was bullish (Summer 2021). ACE’s strategy was to find the most interesting stocks based on the risk level that the firm was willing to take on behalf of its clients.

Bloomberg – Terminal and keyboard
Bloomberg terminal and keyboard
Source: Bloomberg.

My most valuable experience in the firm was to be able to understand the investment philosophy of the firm, which relied on a rigorous analysis of the relationship between risk and (expected) return on the one hand, and on a clear understanding of the investors profile of its clients on the other hand.

Everything is planned! And what I came to realize is that investing has nothing to do with gambling. No technical analysis, no gibberish, only careful analysis of companies through the fundamental analysis of their financial accounts (balance sheet and income statement), financial ratios and company news. As we are unable to predict the future, ACE has an investment philosophy based on the rigorous investment process combining the analysis of the relationship between risk and (expected) return of financial assets and a clear understanding of the risk profile of its clients on the other hand.

The ACE Finance Conseil team.
The ACE Finance Conseil team
Source: ACE Finance et Conseil.

Core missions and duties

During my internship I had to do research on companies and create short presentations for ACE clients. For example, I prepared presentations on Chinese companies for a new client who was not familiar with the Chinese stock market. The Chinese companies involved were the so-called BATX that stands for Baidu, Alibaba, Tencent and Xiaomi. My presentations’ focus was on Tencent and Alibaba, two companies that stroked our interest at that time. The Bloomberg Terminal gave information about the profits made by each business units of the company, and its future estimates. Unlike other sources of information, Bloomberg standardizes information about the different drivers that generate revenue in a company. This gives an excellent overview of the current state of the company in addition to the existing important financial indicators such as the P/E and EPS ratios, the working capital, and the quick ratio (these financial indicators are defined below).

At ACE everyday was a different day, I had many types of missions. Every morning, I prepared a morning briefing. This allowed me to learn many things on the link between political news and companies. I really enjoyed the diversified aspect in my work, and I hope to find a job where I can thrive the same way I did at ACE Finance et Conseil.

About the skills and knowledge

For this type of internship, the prerequisites were to know how to read financial statements as well as knowing what the key financial indicators are, how they are calculated, and how they can be interpreted. Being able to browse the internet with ease and to be familiar with financial tools like the Bloomberg Terminal were important to be efficient in the job. Have an interest in the geopolitical field was an advantage to be able to interpret the news and extract the important information that would affect the economic world and the value of companies.

At ACE I understood that there is a whole other side to the iceberg, companies that are focused on b2b sales (business to business) that play a major role in the economy. These companies in the shadows are mostly part of a supply chain for major b2c (business to consumer) whose brand is known by the public. b2b businesses rarely make it on to the front pages of mainstream news medias but a lot of information is available on media for investors.

Unfamiliar with the region of the East of France I learned many things on the culture and way of living in an anchored European city. Strasbourg is considered as a capital of Europe as it hosts major European institutions such as the European Parliament and the Council of Europe. Because of its ties to both Germany and France after World War II, Strasbourg served as a symbol of reconciliation between peoples.

Key concepts

I present below some key concepts that are useful to understand the internship that I did at ACE Finance et Conseil.

Asset management

Asset management consists in managing capital in the best way by respecting the level risk decided to be taken by the manager, with respect to an estimated rate of return. The responsibility of asset management’s firm is to know how to invest and manage assets correctly and accurately.

ACE Finance provides private investors with more comprehensive advice as part of their investment advisory services and fully documents discussions. The objective is to create transparency regarding the costs and risks associated with their investments. With ACE, clients can module their portfolios and are able to express their preferences after receiving advise from the firm based on fundamental research.

Asset allocation

Asset allocation is a step-in asset management which consists in defining the weight to be given to each category of assets within an investment portfolio. Allocation is generally made by sector (cyclical, defensive, sensitive), by profile (growth, value), by geography and/or by asset class (equities, bonds, real estate, commodities, etc.)

In determining the best asset allocation, the key is to be able to balance between the expected return on assets and the riskiness associated with each of them. Asset allocation depends on the time the investor is intending to invest his/her assets, his/her tolerance for risk and the volatility of the various assets.

As mentioned earlier ACE accompanies clients in their investment and gives them the opportunity to have a say on the way of allocating assets. The level of risk, the geographical or sectoral distribution of the portfolios and the type of products used, or the time horizon of the investments is different specific to each client.

Example of equity portfolio.
 Example of equity portfolio
Source: ACE Finance et Conseil.

Active and passive asset allocation

There are two types of asset allocation management styles: passive and active. Passive management is management based on a buy-and-hold strategy. Active management is based on rebalancing of the portfolio via discretionary decisions or decisions based on quantitative models. Stock picking and market timing are key to a successful active management.

ACE is mostly focused on active management of assets. The goal in active management of assets is to be able “beat the market”, the benchmark. The work done by ACE is to select the assets, using various analysis tools, the mostly likely assets that are likely to grow faster than the benchmark and market in general. This management method, as opposed to passive management, concerns all funds and portfolios that do not aim to reproduce the performance of a reference market, but to do better than the reference market.

Stock picking

Stock picking is a methodic process were an investor searches for stocks that are likely to bring future cash flows. The analyst’s or investor’s view for the price of the stock will determine whether the position is long or short.

When it comes to stock picking ACE does research on various companies and keeps track of the news. The financial statements (balance sheet, income statement and cash flow statement) with the focus on key business indicators (sales and profits) are important to understand the structural investments in the company. ACE also pays great attention to key financial ratios such as: P/E, EPS, working capital, quick ratio, and the EBITDA.

ACE also has partner companies such as JP Morgan and Gemway Equity that collaborate with ACE in this process. Getting insight and trying to understand other people point of view is part of the culture at ACE and how it has done so well for these past 20 years.

Financial indicators

EPS ratio

The Earnings Per Share (EPS) ratio is a financial ratio that shows the amount of net profit that a stock can generate. To calculate the EPS, we divide the total earnings (net income) of the company by the number of outstanding shares issued by the company (or average of outstanding shares).

Earnings per share formula

Note that if the company issued common and preferred shares, the EPS ratio is adjusted to take into account the preferred dividends. The EPS can be positive or negative based on the positive or negative earnings (profits or loss). In case of a negative EPS the company in question does not present a profitable overall activity. However, having a negative EPS is not as rare as you might think. As firms are not always making a profit due to heavy investment (start-ups for example). A company which presents a very fluctuating EPS from one year to another or an EPS which does not stop decreasing from year to year, could cause the downfall of the stock price.

At ACE, the EPS is a ratio that we looked at as an indicator of where the wind was blowing but did not base our decisions uniquely on this ratio since it does not look at the investments made by the firm that could generate important future cash flows.

P/E ratio

The price to earnings ratio (P/E or PER) is an indicator used in stock market analysis. The calculation of PER is very straightforward, divide the market capitalization by the net earnings or by dividing the market price of a share by the earnings er share (EPS). Another way of calculating it is by dividing the individual price of a share by the net income per share. You can calculate PER based on quarterly and yearly results and even projected results which would give the expected PER ratio.

Price earnings ratio (PER)

The PER represents the number of years it would take for a company to buy all its stocks. For example, a PER of 20 means that a company would take 20 years to “redeem” all its floating capital with constant profits.

This indicator can be used to evaluate a company to its competitors despite their differences in size as it looks at firm valuation according to their profits. A lower PER indicates a cheap stock, a higher PER an expensive stock.

Analysts may consider two types of PER: the trailing PER and forward PER. Simply put, the trailing PER looks at historical earnings to calculate PER. The forward PER considers expected earnings.

Bloomberg Terminal – Relative value function (RV) – Baidu – 14.06.2021
 Bloomberg RV function
Source: Bloomberg.

The RV function on the Bloomberg Terminal gives us indications on the relative value of the firm. At ACE when doing some research on Baidu, the PER was one of lowest amongst its competitors. The value of the PER is important as it reflects investors’ expectations. Thus, the PER can reveal the speculations of investors, who anticipate a strong increase in future profits: in which case, the higher the PER, the greater the expected increase in profits. So it is important to monitor and the progress of the PER.

Working capital

Working capital is an accounting concept which represents the amount the business has available to pay total operating expenses such as suppliers and employees. This indicator gives information on the company’s ability to cover its expenses.

Working capital

Quick ratio or Acid test

The quick ratio, or acidity test, is used to determine short-term liquidity in a company. To calculate this ratio, the value of the company’s current assets, excluding inventory, is divided by the company’s current liabilities (see formula). The goal of an acid test is to estimate the financial stability of a firm by measuring the company’s ability to immediately pay its debts using cash.

Acid test ratio

Assets used to calculate the quick ratio include cash and other very liquid assets such as marketable securities and accounts receivables. Inventory is also excluded from the quick ratio formula because it cannot be sold immediately to generate cash flow.

EBITDA

EBITDA (earnings before interest, taxes, depreciation, and amortization) is an indicator that is used to compare companies on their potential ability to generate wealth regardless of the balance sheet differences. EBITDA does not consider the investment and financing policy and the impact of taxes. On the contrary, a negative EBITDA means that the company is not profitable. The EBITDA is computed as follows:

EBITDA

EBITDA is a financial indicator that measures a company’s revenue before subtracting interest, taxes, depreciation and amortization charges and provisions on fixed assets.

Why should you be interested in this post?

If you are looking at getting an internship in an investment firm, this post will surely be interesting to you. This post provides a little reminder of the basics of asset management. There are plenty of investment firms in the world however ACE is unique by its approach to understanding the markets and counselling its clients. In this post I detail some of the core missions that I had as a newcomer to the professional investing field.

Word of conclusion

As my first internship inside of an asset management firm, this initiation to the financial world was exactly what I was looking for before applying at ACE Finance et Conseil. ACE Finance et Conseil differentiates itself from other companies by its simplicity in functioning and the richness of its experience. This unique experience has made me want to explore the financial world even more.

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Useful resources

ACE Finance et Conseil

Bloomberg terminal

Bloomberg market concepts

About the author

Article written in March 2022 by William LONGIN (EDHEC Business School, Global BBA, 2020-2024).

Understand the importance of data providers and how they influence global finance…

Understand the importance of data providers and how they influence global finance…

Louis DETALLE

In this article, Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023) explains the importance of data providers and how they influence global finance…

What are data providers?

A data provider is an intermediary between data and data users. Indeed, a data provider provides market data to financial firms, traders, and investors. The data distributed is previously gathered, organized and presented in an understandable way. Data providers collect the data from sources such as stock exchange feeds, brokers’ notes and dealer desks or regulatory filings. Some names will definitely ring a bell, such as Bloomberg, Thomson Reuters whereas some others will be less known as Moody’s Analytics.

The different types of data that are exchanged for financial purposes

When it comes to data used in finance, trading rooms are the best example as they contain almost nothing but data. Indeed, transaction prices, traded volumes of stocks and bonds are displayed at all times. But trading rooms are only one specific of example of data’s use in finance.

As mentioned, there are many different types of instruments (e.g., stocks, bonds, currencies, funds, options, futures, etc.) and hundreds of financial markets for investment, which leads to an extremely large flow of data exchanged.

The types of data offered vary by data provider. Generally, they cover information about companies and financial instruments (options, shares, bonds, treasury bonds and currencies) which companies might trade or issue.

The data can be updated every day or several times a day! Intraday data for instance are prices provided throughout the day and are usually released on a continuous basis.

The main dynamics of the Data Providers’ market

The explosion of financial data, enabled by the Internet tremendous potential, caused an explosion of demand for financial data. As evidenced in 2006 by the British mathematician and Tesco marketing mastermind Clive Humby’s quote, “Data is the new oil”, the data providers enjoy a market that seems to be limitless. Indeed, as data provider raw material’s amount is ever-increasing, it appears they will thrive for decades.

In addition, the market seems to be detained by only a few actors among which Bloomberg that acquired BNA and BusinessWeek. This contributes to curbing the number of data providers and improving the monopoly of Bloomberg on the data-providing market. Let’s review the market shares of the 4 major data providers: Bloomberg enjoys a comfortable 33,4% market share, Refinitiv Eiken follows with a 19,6% share of the market, Capital IQ has a 6,2% market share when FactSet closes the ranking with 4,5% of the market. (source:https://www.wallstreetprep.com/knowledge/bloomberg-vs-capital-iq-vs-factset-vs-thomson-reuters-eikon/)

Useful resources

Bloomberg

Refinitiv

Capital IQ

FactSet

Thomson Reuters

Related posts on the SimTrade blog

   ▶ Louis DETALLE The importance of data in finance

   ▶ Louis DETALLE Reuters

   ▶ Louis DETALLE Bloomberg

About the author

The article was written in March 2022 by Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023).

The importance of data in finance

The importance of data in finance

Louis DETALLE

In this article, Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023) explains the importance of data-management for corporations and how they are used to improve profitability.

According to a study published by CapGemini untitled: The data-powered enterprise: Why organizations must strengthen their data mastery, it is estimated that the gain from efficient data-management would represent 22% in terms of firm profitability.

Why is data used?

The use of data in finance can also be very useful in finance for various reasons.

Indeed, the multitude of data available allows for a deeper understanding of the market in terms of risks and opportunities. This knowledge is accompanied by an important consideration of political, social and economic factors.

As early as 2006, British mathematician and Tesco marketing mastermind Clive Humby stated “Data is the new oil.” The companies with the largest market capitalizations also bear witness to this importance of data. The ranking shows of tradingstat shows a podium of Apple, Microsoft and Google: the predominance of data-driven companies is clearly observable here.

In which finance-related fields is data used?

In finance, it is especially in the trading rooms that data has become an absolutely indispensable tool. Indeed, it is thanks to Big Data – i.e. increasingly exhaustive data, at an ever faster pace – that high frequency trading has been developed. In short, high-frequency trading makes it possible to place several thousand buy and/or sell orders in a few seconds, or even milliseconds, while optimizing risk management in order to adapt the strategy to market responses. This trading strategy allows for buying and selling in a sufficiently short period of time to avoid a potentially negative market movement during the operation.

On the other hand, retail banks (i.e. banks for individuals) are also confronted with the challenges of data-management. The development of online services offers them a better knowledge of their customers, which leads to a change in the bank’s relationship with its customers. In doing so, banks improve their ability to adapt their offer to the customer profile. Big Data also enables banks to fight fraud. Banks are now able to monitor all bank card transactions and be alerted when a user makes a payment (particularly in terms of amount, time or geographical area). For investment banks, whether it is the implementation of a more reliable scoring of credit files, the pooling of data between banks, analysis of the “sentiment” of investors for traders or the compliance of data and its processing, the indispensable character of data is no longer to be proven.

The importance of data regulation though

The use of data in finance is very useful but can be problematic when the data concerns the personal data of users or customers. In this context, financial actors are subject to ever increasing regulation and the adoption of the EU’s GDPR, in 2016, seems to be a step in this direction.

Useful resources

BlackRock L’utilisation du Big Data dans un processus d’investissement

Related posts on the SimTrade blog

   ▶ Louis DETALLE Understand the importance of data providers and how they influence global finance…

   ▶ Louis DETALLE Reuters

   ▶ Louis DETALLE Bloomberg

About the author

The article was written in March 2022 by Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023).