Alternative Data Heads towards $11 Billion Market
May 13, 2020 by Mark Dunn
The global stock markets have been at their most volatile this year as they reeled from the impact of COVID-19. Hedge funds and other investors are looking for signals for how companies will perform in the post-COVID world. Rather than rely entirely on traditional sources, it seems more and more are turning to alternative forms of data. Now, a new report from Research and Markets has projected that the global alternative data market could reach $11.1 billion by 2026.
The rise of alternative data is not a new trend. Investors have used information from social media, media, web scraping, mobile phones and other sources for at least a decade. The volume of this type of data available to investors has grown exponentially. IBM has found that alternative data represents 90% of all data in circulation in recent years. The pace at which hedge funds and other financial services companies have adopted alternative data has been rapid. In fact, this report demonstrates that it is now used by the majority of hedge fund managers.
Why is alternative data so useful?
The report suggests that alternative data is sought after for several key reasons:
- It gives hedge funds “a competitive edge” by identifying opportunities for investment.
- It supports “risk management measures” by flagging factors which could hurt a company’s share price.
- It gives a very broad view on human behaviour: as our lives become increasingly digital, we are pouring out more data in web and social media posts, using of mobile phones which reveal location and other data, and making credit and debit card purchases with our phones.
Alternative data can also help support investment decisions by bringing insights into areas, such as:
- Tracking customer sentiment
- Proactively managing compliance risk
- Addressing supply chain sustainability and vulnerability
- Keeping tabs on corporate activities of rivals
- Identifying market-moving trends
Alternative data is being adopted widely across sectors
While alternative data is most commonly used by hedge funds, the report shows that it is increasingly valued and valuable in many industries, including:
- Media and entertainment
- Property and construction
- Transportation and logistics
- Information technology and communications
Alternative data is also a vital source for those who work in academia. Those involved in academic research projects or public-private partnerships in healthcare benefit from access to global data on patents that have been filed and approved. This can provide breakthroughs for research and development because:
- It indicates who are the potential competitors in a field, what they are working on, and what are their projected timelines until they launch a new initiative.
- It shows prospective collaborators on a particular area.
- It suggests new topics or trends where further research could be fruitful.
How can we help?
Nexis® Data as a Service offers extensive alternative data sources that investment organisations and other sectors can tap for meaningful insights. This includes:
- News, newswires, and press releases from around the world which allows sentiment analysis of a company’s coverage over time.
- Critical Mentions Broadcast Content, including full transcripts and video files of executive interviews, which show the full context of an interview rather than cherry-picked quotes used by other news sources.
- Global lists of Politically Exposed Persons (PEPs), sanctions and watchlists, which indicate a potentially heightened risk of exposure to bribery and corruption.
- Patent data covering 105 countries.
Predictive data analytics, machine learning algorithms and quant models can’t run on empty. Maximise the value achieved from artificial intelligence applications with the petabytes of alternative data available through Nexis Data as a Service.