Social Media Influences Institutional Investment Decisions

Social media is joining traditional financial news media as a key source of information used by institutional investors, according to Greenwich Associates.

A vast majority (80%) of institutional investor decisionmakers polled by Greenwich Associates said social media is a part of their regular work flow, with three in 10 suggesting information obtained through social media has directly influenced an investment recommendation or decision.

The findings are outlined in a new report from Greenwich, “Institutional Investing in the Digital Age: How Social Media Informs and Shapes the Investing Process.” The report argues that social media platforms are slowly but surely joining traditional financial news media as a key source of information used by institutional investors during their investment decisionmaking process. Many simply use social media to generate ideas and topics for conversation with advisers and consultants, the report notes, but more and more, investors are finding actionable insights through social media.

About half the institutions polled 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, while 37% said they shared and discussed financial/investing information from social media with decisionmakers at their companies.

Other findings suggest about one-third of institutional investors feel information learned on social media influenced a decision to work with a particular client or company—about the same number that says 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,” explains 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.”

Currently LinkedIn appears to be the top platform for professional use, Greenwich says, with 52% penetration in the institutional investor segment. Eighty-five percent of investors who use the platform say they do so at least weekly. Greenwich finds Facebook and YouTube are the most popular platforms when it comes to personal use, but they have also gained traction in the professional space for group discussion and video distribution. Institutions cited the value of the Twitter news feed in seeking opinions or commentary on market events, but said LinkedIn feeds were better targeted.

Greenwich says the results of the study demonstrate 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.” For institutional investors themselves, it's critical to be able to assess the quality of information obtained through less formal social media channels. 

“Having an updated company site with relevant product details should be considered table stakes,” Connell concludes. “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.”

A full copy of the report can be requested here.