Alternative data refers to non-traditional data that is used in the investment process. We have identified over 20 categories of alternative datasets.
Innovative Asset Managers are integrating Alternative Data into their investment processes.
- The last major change to the fundamental research process was the introduction of expert networks in the late 90s.
- Alternative data is the next. The rise of big data “represents a watershed moment in the history of investment management”, Blackrock’s SAE Group.
- The data revolution is producing hundreds of providers of alternative data across 20+ categories e.g. consumer transactions, app usage, web traffic, geo-location, international trade.
- Innovative buyside firms have been leveraging alternative datasets for years – market spend on alternative data is already $200m according to research by TABB Group.
- In H2 2016 alternative data started to become mainstream: FT #1, FT #2, Institutional Investor, Economist, Fast Company.
The view of innovative buyside professionals:
“Asset managers have got to get much smarter and work out how we can use the vast amount of data out there more effectively. Using data effectively will give you the vital, winning edge.” – Head of Investment of asset manager with $375bn AUM.
“Big data is underappreciated in the sense that its rise represents a watershed moment in the history of investment management. As the traditional line between passive and active has begun to blur with the rise of smart beta strategies, true alpha has proven increasingly elusive. In response, managers across the spectrum from equity to fixed income to impact investing are looking to big data for an edge.” – Asset manager >$1tn AUM.
“Sourcing data to find investment opportunities, such as trawling through credit card and social network data to forecast sales, analysing rail car networks to measure the pulse of the US economy or using weather data to forecast crop yields.” – CIO of asset manager with $30bn AUM.
“How will any fund manager be able to function in the future without adopting at least some aspects of a quant approach? My firm is exploring ways that we might discern investor and insider sentiment from big data, including news, blogs, tweets and product reviews.” – CIO of asset manager with $60bn AUM.
“We believe the Data Revolution is here to stay, and that investors should recognize its potential to reshape the economic landscape. We believe the changes wrought by the Data Revolution will continue to ripple across industries–separating winners from losers, based on those who can best use data as an advantage–including in the world of investment management.” – Asset manager $850bn AUM.
“We can capture every time somebody is saying they bought a new car. We could add those up and can compare that to the stats and be really on the pulse of what’s going on with something like auto sales or, similarly, with home sales.” – Co-CEO of asset manager with $150bn AUM.