Social media is joining traditional financial news media as a key source of information used by institutional investors in their investment processes. A new study from Greenwich Associates reveals that almost 80% of institutional investors use social media as part of their regular work flow, and approximately 30% of these investors say information obtained through social media has directly influenced an investment recommendation or decision.
In a report released today entitled, Institutional Investing in the Digital Age: How Social Media Informs and Shapes the Investing Process, Greenwich Associates presents the results of its study of 256 corporate and public pension funds, insurance companies, endowments, and foundations in the U.S., Europe and Asia.
About half these institutions say information obtained on social media has prompted them to take some specific action. For example:
- 48% of the investors said information from social media prompted them to do additional research on an industry issue or topic
- 37% said they shared information from social media with decision-makers at their companies
- 34% said information learned on social media influenced a decision to work with a particular client or company
- 33% said information obtained on social media triggered a discussion with their investment consultant
“These results show that social media is influencing decisions that can result in the allocations of billions of investment dollars around the world,” says Dan Connell, Head of Market Structure and Technology at Greenwich Associates and author of the study. “With approximately 40% 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.”
LinkedIn Top Platform for Professional Use
Given the commitment of the professional user, LinkedIn is the preferred source for professional use with 52% penetration in the institutional investor segment, and 85% of those investors that use the platform are doing so at least weekly. Among the other key findings presented in the report are the following:
- Institutional Investors in Asia are consistently higher users of all forms of social sources than their counterparts in North America and Europe.
- Facebook and YouTube are the most popular platforms when it comes to personal use and have also gained traction in the professional space for group discussion and video distribution.
- LinkedIn is still the most widely used platform of investors for work-related purposes. More than 50% of study participants said they use LinkedIn for professional or financial purposes.
- Institutions cited the value of the Twitter news feed in seeking opinions or commentary on market events, but said LinkedIn feeds were better targeted as they more closely reflected their professional ties.
Implications for the Industry
The results of the Greenwich Associates study demonstrate that asset managers and other investment firms looking to attract investment dollars from pensions, insurance companies, endowments, and foundations must consider the nature of their social media presence.
“Having an updated company site with relevant product details should be considered table stakes,” says Dan Connell. “Stand-out firms will go much further by acting as regular contributors of content and insight, creating a relationship with their potential clients and drawing them back to their site again and again.”