Lest you underestimate the effects of social media, consider this: Institutional investors are relying on it, along with conventional financial news media, to shape their investment decisions
That's right. According to a study from Greenwich Associates titled "Institutional Investing in the Digital Age: How Social Media Informs and Shapes the Investing Process," nearly 80 percent of institutional investors consider social media part of their regular work flow, and around 30 percent say social media-provided information has played a role in their investment decisions or recommendations,
Greenwich studied 256 corporate and public pension funds, insurance companies, endowments, and foundations in the United States, Europe and Asia, and found that about half of the respondents said information they received from social media spurred them to take specific action.
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Among those actions were additional research on an industry or topic (48 percent); sharing the information from a social media source with decision-makers at their companies (37 percent); making a decision to work with a particular client or company (34 percent); and talking with their investment consultant because of information found on social media (33 percent).
"These results show that social media is influencing decisions that can result in the allocations of billions of investment dollars around the world," Dan Connell, head of market structure and technology at Greenwich Associates and author of the study, said in a statement.
Connell added, "With approximately 40 percent of the institutions globally expecting to increase their use of social media in the coming year, we're projecting a further, rapid increase of social media influence in institutional investment markets."
Of course, not all social media—or users—are created equal. The study found that institutional investors in Asia use more social media, more consistently, than do North American and European institutional investors.
In addition, while Facebook and YouTube have increased in popularity within the professional space for group discussions and distribution of videos, LinkedIn is still the champion for professionals. Among institutional investors, 52 percent rely on it rather than another form of social media, and 85 percent of those who use it do so at least weekly. They also prefer LinkedIn feeds as better targeted to their professional needs, although they use Twitter news feeds to track commentary and opinions on events in the market.
The study pointed out that asset managers and other investment firms not only can't ignore the influence of social media when trying to attract investment dollars from pensions, insurance companies, endowments and foundations, they have to be careful about the presence they themselves cultivate on such forums.
Connell said, "Having an updated company site with relevant product details should be considered table stakes."
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