2021 Alternative Data Year in Review
This letter was taken from our annual report titled ‘2021 Alternative Data Report: Year in Review’. You can access a copy of this report here.
Dear All,
Welcome to our “2021 Year In Review”. Given Eagle Alpha’s role as the leading alternative data aggregator and advisor, this year’s review will be both insightful into the major themes we observed in 2021 and, as importantly, be inspirational and thought-provoking in how you approach alternative data in 2022.
It has been another exciting year with the ongoing growth in data supply and continued adoption by a widening variety of data consumers. One could argue that we are now approaching the 5-year anniversary of a meaningful step up in the adoption of new data sources by the asset management industry. Eagle Alpha has been there since the beginning and celebrated our 9th birthday in September 2021. What started very much as a list on a spreadsheet of fewer than 100 datasets available to funds has now evolved to a platform with 1,600 datasets, delivery of data, and evolved solutions for data buyers and vendors.
For the entire industry, I assure you we still have a long way to go on the adoption curve. Within asset management, our proprietary survey midyear pointed to ongoing data spend growth with high renewal rates of integrated data sources pointing to the value of alternative data. This contrasts with 3rd party surveys pointing to ongoing declines in spending on sell-side research and a debate on the alpha obtained. It was over 20 years ago that there was an increase in academic research questioning the value of sell-side research. In asset management, these types of trends and changes in behavior can play out over very extensive periods. It remains early days for alternative data adoption.
This year ESG has been an additional catalyst with private, public equity, and credit market managers engaging with new data sources to satisfy their client base or the regulator. There remains a significant disconnect between the number of investment mandates with ESG requirements versus the adoption of new ESG relevant data sources by the end investment advisors. It is time to supplement ESG scoring systems with more data sources.
The adoption trend of new data sources is not just a fund management story. The stereotype of a hedge fund using a single data source to ‘trade the quarter’ is in the distant past. In our experience, it rarely existed and rising adoption has correlated with a movement to longer-term use cases as well as combining datasets to arrive at insight. We continue to see a broadening of dataset applications to research questions and capital allocation decisions in private equity, real estate, venture capital, and corporate. You will find many surveys across the web that will validate this theme and we see it every month in our business.
Whether it is private equity using alternative data for deal origination and due diligence or corporate insight teams using new data sources – the trend is very real and bodes well for the expanding opportunity set for us as an aggregator and our buyer and vendor clients. In addition, advanced global consultants are expanding their resources to help corporates and private equity on this journey.
One important industry development I have seen this year has been an increase in partnerships. As various alternative data solution providers have become more focused, developed, and specific in setting out their stalls – it makes a lot of sense for providers to work together to enhance end data consumer experiences. A data-consuming entity will need to solve for data prioritization, compliance, ingestion, preparation, evaluation, integration, and, possibly, visualization. Many years ago, this all required extensive recruitment exercises and internal resourcing to solve the internal friction points to arrive at ‘data throughput’. This has now changed with the expanding number of solutions and SaaS services one can utilize to work with data in a more resource-light manner. The ability to outsource to complement internal requirements is easier than ever.
With the ongoing supply of data sources and forums to find data, I argue it is becoming easier to find the wrong dataset. At Eagle Alpha, our role remains clear – we want our buyer clients to have a best practice framework in place and help them prioritize the right datasets versus the research question. Importantly, post prioritization we are now agnostic as to where we deliver the datasets for evaluation. This can be Snowflake, AWS, an alpha testing platform, or a firm that specializes in visualization on behalf of a client. What is key is the efficiency of throughput.
Regardless of what vertical one is in, one must ask how long does it take to source, prioritize, and receive trial data to answer a research question or business need? Most importantly, your conversion from the trial is a key indicator to follow. We have a key role to play in improving these for both buyer and vendor clients. There is still significant scope for buyers, aggregators, and vendors to work together to improve efficiency in relation to industry standardization, like the FISD initiatives, which supports faster data and compliance processes.
As we approach year-end, to all our clients and partners we thank you for your contribution to the Eagle Alpha ecosystem and for working with us in 2021. For those close to us, I know you appreciate the hard work that has gone into the platform and solution development throughout the year. The growth on both sides of the platform is a vote of confidence in what our solution, data science, and engineering colleagues have developed. We trust you will have a well-deserved break. Hopefully, the Review serves as part of your vacation reading, and you return inspired in 2022. We look forward to speaking to you then.
Best wishes,
Niall Hurley
CEO
This letter was taken from our annual report titled ‘2021 Alternative Data Report: Year in Review’. You can access a copy of this report here.
