Cognitive Credit has been launched to improve the efficiency of credit analysis through using machine learning to analyse data.
Robert Slater, chief executive and founder of Cognitive Credit, told Markets Media that he has worked in credit markets for 15 years including more than a decade at Citi and on the buy side.
Slater said that a huge challenge facing credit markets is that analysts are inundated with information. The corporate credit market is more than $10 trillion in size but there has been minimal technical innovation.
“Fundamental credit analysis is done the same way as 20 years ago using spreadsheets,” he added. “The process is still extremely manual.”
Slater set up Cognitive Credit two years ago to develop an advanced tool to make research more efficient, rather than providing content, opinions or advice. The firm has been collaborating with investment firms and testing with potential users.
It’s an exciting time for technology in #fixedincome markets – @cognitivecredit @AB_insights @WeAreAdaptive @HermesEOS discuss how to best use technology to improve workflow and access to liquidity #FILS19 pic.twitter.com/EHf913c3G7
— Fixed Income Leaders (@FixedincomeGuru) October 8, 2019
“Our proprietary data pipeline uses machine learning to analyse documents such as financial statements and bond prospectuses,” Slater added.
The structured and unstructured data then automatically populates financial models in Cognitive Credit. Web-hosted financial spreadsheet models can provide years of annual and interim financial data, as well as additional functionality such as derived credit metrics, forecasting functionality and text search capabilities. Analysts can easily click through to find the original data source.
“We are not trying to replace analysts,” said Slater. “Credit analysis is still an art, not a science, and cannot be done completely by machines.”
However, he continued that computers are better at certain tasks, which then frees up analysts for higher value work. For example, they do not need to spend time finding documentation and Cognitive Credit can also automatically generate credit memos.
"Buyside still lives on spreadsheets" says @Hermesinvest s Lee at #FILS "innovation for in-ouse teams is hard -they do incremental day to day change" – Barrett. " Robert Slater @CognitiveCredit "our software augments the user. Collaborating with users so rewarding for both sides
— Andrew Marshall 🇺🇦 (@Andrew_Marshall) October 8, 2019
Cognitive Credit is initially launching in European high-yield which Slater described as having poor reporting standards and transparency.
“Our ambition it to be the ‘must-have’ credit tool,” said Slater. “Analysts should feel they cannot do their job without it and will be at a disadvantage if it is not part of their daily workflow.”
Pentech Ventures is one of Cognitive Credit’s shareholders.
Marc Moens, partner at Pentech, said in a statement that when the venture capital firm met the team at Cognitive Credit they were impressed with their combination of expertise in institutional credit markets with a deep knowledge of artificial intelligence and big data handling.
“The way their product captures, structures, analyses, verifies and displays complex data is unique, and we are excited to support them in establishing their company as a technology leader in the global corporate credit market,” added Moens.
