A quiet week sheds light on the value of 'thought leadership'
Media and investing are two peas in a pod
Look I'm going to keep it real: nothing happened this week. We’re talking CERN levels of vacua.
It got so bad that when Abrdn's boss said he's annoyed that the press was still making fun of their two-year old rebrand, it made national news. Bereft of anything else to write about, City AM dedicated its entire cover to a jokey response.
The press made hay of him choosing the word "Bullying" as a term for the repeated poking at his company's vowel-divergence.
“Would you do that with an individual? How would you look at a person who makes fun of your name day-in day-out? It’s probably not ethical to do it. But apparently with companies it is different”
I found it interesting he applied diversity-and-inclusion lingo to a company. Nothing signals a dying term more than when its use gets divorced from the original meaning.
That said, the investment management industry has a tricky relationship with the media. Positive press coverage has been correlated repeatedly with improved inflows. (See Treasure Corner below).
So, all things considered, the interesting financial stories this week weren’t about what got published, but about who the media chooses to elevate.
Consider Jamie Dimon. This week, weekly Google search volumes for his name hit an annual high of nearly 460,000 searches, four times higher than the usual rate.
This had to be related to the enormous coverage of JP Morgan's annual shareholder letter to investors. The "thought leader" status Dimon has earned in the media — on AI, China, oil and gas, interest rates and so forth — may have contributed to JP Morgan's stock rising 54% over the past twelve months.
For a fun comparison, the Goldman Sachs stock rose 26% over the same period; its CEO, David Solomon, is probably as well-informed about the markets, but far fewer people care. Weekly search volumes for his name hover at around 8000...
It's not hard to arrive at the conclusion that if press coverage is lucrative, what better than to own your own press?
Certainly, Robinhood has been doing this math. This week, it officially launched a website for its new media outlet, Sherwood News. Since January, Sherwood has been operating as an independent subsidiary. Back in December, the outlet also acqui-hired Chartr, a UK data-vis media company.
According to Axios, more media companies are looking to combine news and information with trading platforms. They’re all looking to emulate Bloomberg:
In just five years since launching its paywall, Bloomberg Media has hit 500,000 subscribers. According to Press Gazette, it's one of only sixteen English-language news publishers to have reached this milestone.
On the face of it, the profitability of the Bloomberg news subsidiary is measured in straight terms; while not yet profitable, revenues have been growing consistently. But of course, no one really measures it this way. According to the FT
“Out of Bloomberg’s more than $12bn of annual revenue, only about $500mn comes from media”
Time will tell if Robinhood manages to spin Sherwood into becoming profitable in the sense that matters: adding material value to its investment business. Because if it does, I suspect Vanguard and BlackRock will be the first to notice.
In which case, creating “thought leadership content” may take on a new, far more commercial twist.
Treasure Corner:
Do the mentions of a fund in financial media help with its flows? Researchers apparently love asking this question, and the papers exploring it consistently end with a resounding ‘Yes’.
One article in this (admittedly niche) field was an early application of analyzing large-volume news coverage. The 2007 paper is titled Headlines and Bottom Lines: Attention and Learning Effects from Media Coverage of Mutual Funds (by Ron Kaniel and Laura Starks).
In it, the researchers developed a bespoke database containing 10,000 articles about mutual funds (U.S. market). Here are three interesting things they found:
Media coverage seems to play a more significant role for smaller and lesser known funds, and the fund’s return performance enhances the impact of media coverage.
In addition to fund flows responding to the existence of media coverage, the frequency of news stories also has a big influence on flows.
Finally, they compared the flows into funds that were listed in a ranking article against funds with almost identical returns that were not listed in the ranking article:
“We find significant differences in flows between the two sets of funds, suggesting that just getting into a ranking article can provide significant attention effects for a fund.” (emphasis mine)
The story doesn’t quite end there. Seemingly, managers have very little control over whether they get selected to feature in a ranking article. But!!!
Another piece of research dug further (on a different dataset) to discovery why these post-writeups inflows were happening. And it turns out managers have a role to play in the matter. More on that next time.