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Alternative Market Briefing

Half of investment managers use alternative data, another quarter planning to do so this year

Thursday, May 23, 2019

Laxman Pai, Opalesque Asia:

Asset managers are making greater use of "alternative" data sources, ranging from social media sentiment to crowd-sourced data, to gain an edge, said a study.

71% of asset managers believe that using alternative data gives them an investing edge over competitors, according to a new study by Greenwich Associates commissioned by business information provider IHS Markit.

74% of firms surveyed agreed that alternative data is starting to have a big impact on institutional investing, demonstrating its valuable explanatory power to both quantitative and fundamental investment models.

Around half of investment managers are currently using alternative data with another quarter planning to do so in the next 12 months, according to the research.

Alpha and long-term competitive edge found in alternative data

Nearly 30% of quantitative funds attribute at least 20% of their alpha to alternative data, the study revealed. Furthermore, 42% of all asset managers believe the alpha edge they achieve by using alternative data lasts for at least four years.

Driven by the value they see, investment firms are spending more on procuring alternative data. In 2018, budgets increased by 52%, on top of an increase of 76% the previous year, according to the study.

"Even more revealing than the high level of value asset managers attribute to alternative data, is that they also believe using it helps them achieve long lasting competiti......................

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