How Alternative Data can Add Value in Investments?
capitalmarketsciooutlook

How Alternative Data can Add Value in Investments?

By Capital Markets CIO Outlook | Tuesday, November 12, 2019

Alternative DataAlternative data allows the investment firms to include a broader market perspective into their investment decisions.           

FREMONT, CA:  Alternative data utilizes data to gain insights from non-financial and non-traditional sources to improve investment decisions. The incorporation of alternative data is influencing various investment ventures such as mutual funds, hedge funds, and pension funds. The digital investment space is also getting impacted by the emergence of alternative data. It is essential to understand the complex factors guiding the digital transformation as it can offer numerous strategic opportunities to the investors. Proactive investment managers are already utilizing alternative data sources from various sources such as social media feeds, news, metadata from email, and other geospatial information to enhance their investment strategies.  

Investment managers are getting a broad perspective of the market with the help of alternative data. For instance, coupling the information gained from twitter with the complex analytical tool is enabling the investors to achieve a better return on investments. Investment firms are embracing alternative data to develop a more quantitative approach for their investment strategies. The advancement in technologies such as machine learning (ML) is enabling the investment firms to utilize data from varied sources.   Portfolio Analytics

The alternative data were previously inaccessible to the investment firms. However, the present advancements in analytics solutions can assist in gathering and processing relevant data spread across multiple websites and databases. Hedge funds are another aspect of the capitals market that has benefitted immensely from alternative data. Hedge funds managers use alternative data to track market supply, demands as well as shifts in inflation around the world. Alternative data is also assisting the hedge fund managers with a competitive analysis that provides more metrics to the firms to compare their financial performance against their contemporaries.

Finally, data from varied sources echo the investment sector adage of asset diversification. Alternative data can provide the key data inputs to the investment managers that are looking to diverse a company’s portfolio. Investment firms are increasingly utilizing the skills of data scientists to assess the massive alternative data sets and foster portfolio diversification.

Thus, alternative data can provide an investment firm with an edge over other players. An early investment into solutions to collect, refine, and process alternative data will reap long-term benefits for the investment firms.

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