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Alternative Market Briefing

Hedge funds turn to predictive analytics to capture political risk

Tuesday, October 31, 2017

Bailey McCann, Opalesque New York:

Despite recent political turmoil here in the US and abroad, markets have been relatively sanguine. Market observers will tell you that historically, geopolitics has little impact on how markets move broadly, but political risk can have a significant impact on specific strategies or individual stocks. New York-based Predata is using predictive analytics to give managers information on political risks that could impact portfolio positions or strategies.

"What we are doing is capturing a lot of the planning around political risk events," Predata CEO James Shinn tells Opalesque. "Say, for example, there is going to be a labor strike. Because we are pulling in data from social media, news, forums, we can often predict when that strike will happen and signal our clients."

Predata also maintains a political risk index that tracks potential hotspots.

Shinn, who previously worked for the Central Intelligence Agency as National Intelligence Officer for East Asia and then served as Assistant Secretary of Defense for Asia, says political risk can add unexpected volatility to strategies that invest in assets that are sensitive to government action. However, it is often difficult to track when risk events are likely to happen. Shinn created Predata in order to synthesize publicly available information from verified sources and give managers a way of monitoring social data for specific signals.

Users on the platform can build their own ......................

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