Increasing returns with alternative data
September 12, 2017

Some 90 percent of asset managers and hedge funds employing alternative data sets as part of their investment strategies say the use of this data is paying off by delivering hoped-for returns. 

A new study from Greenwich Associates finds this high level of satisfaction is fueling demand and driving the total spend on alternative data sets by investors in Europe and the US to nearly US$170 million per year. Nearly half the asset managers interviewed and just shy of three-quarters of hedge funds plan to beef up their alternative data spending in 2018.

"The asset managers and hedge funds we spoke with feel they are deriving a significant advantage from the use of alternative data," says Kevin McPartland, Head of Market Structure and Technology Research at Greenwich Associate and co-author of a new report, Putting Alternative Data to Use in Financial Markets. "But investors hoping to replicate that advantage better move fast, because the term ‘alternative' is fleeting. Today's alternative data will only be alternative for so long."

Although alternative data is a coveted tool for institutional investors seeking alpha, many on the buy-side can attest that turning a seemingly endless array of data into something useful can be a complex and costly task. Utilizing alternative data comes with two major challenges: finding and gaining access to the data needed (or don't yet know is needed) and securing the tools to analyze these huge data sets and taking action on those findings.

Greenwich Associates says this new report provides a detailed examination of how investors are both finding new alternative data sets and putting that data to work. "Looking ahead, data captured from the internet of things (IoT), which includes a long list of internet-connected devices from light bulbs to automobiles, presents a large opportunity for both providers and investors," says Dan Connell, Head of Market Structure and Technology at Greenwich Associates and co-author of the report. "The potential upside continues to outweigh the challenges and we expect to see the demand for alternative data and the tools needed to put that data to work grow."





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Some 90 percent of asset managers and hedge funds employing alternative data sets as part of their investment strategies say the use of this data is paying off by delivering hoped-for returns. 

A new study from Greenwich Associates finds this high level of satisfaction is fueling demand and driving the total spend on alternative data sets by investors in Europe and the US to nearly US$170 million per year. Nearly half the asset managers interviewed and just shy of three-quarters of hedge funds plan to beef up their alternative data spending in 2018.

"The asset managers and hedge funds we spoke with feel they are deriving a significant advantage from the use of alternative data," says Kevin McPartland, Head of Market Structure and Technology Research at Greenwich Associate and co-author of a new report, Putting Alternative Data to Use in Financial Markets. "But investors hoping to replicate that advantage better move fast, because the term ‘alternative' is fleeting. Today's alternative data will only be alternative for so long."

Although alternative data is a coveted tool for institutional investors seeking alpha, many on the buy-side can attest that turning a seemingly endless array of data into something useful can be a complex and costly task. Utilizing alternative data comes with two major challenges: finding and gaining access to the data needed (or don't yet know is needed) and securing the tools to analyze these huge data sets and taking action on those findings.

Greenwich Associates says this new report provides a detailed examination of how investors are both finding new alternative data sets and putting that data to work. "Looking ahead, data captured from the internet of things (IoT), which includes a long list of internet-connected devices from light bulbs to automobiles, presents a large opportunity for both providers and investors," says Dan Connell, Head of Market Structure and Technology at Greenwich Associates and co-author of the report. "The potential upside continues to outweigh the challenges and we expect to see the demand for alternative data and the tools needed to put that data to work grow."



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