Ways how Alternative Data Optimizes Capital Markets

Ways how Alternative Data Optimizes Capital Markets

By Capital Markets CIO Outlook | Friday, September 06, 2019

With alternative data going mainstream, investors are gaining timely and innovative experiences and investment opportunities.

FREMONT, CA: According to JP Morgan, an estimate of $2 billion to $3 billion is spent by asset managers on alternative data, which has transformed the investment management process for asset managers such as hedge funds, pensions, etc. Alternative data understands the modern forces driving the digital transformation to provide strategic opportunities. Investors who do not follow the seismic shift and fail to update the investment processes face strategic risks frequently. Traditional investors should be quick to adopt alternative data and embrace the quantitative approach. Alternative data has the potential for information advantage over the market regarding investment management decisions.

With the use of alternative data, sophisticated investors are enhancing their decision making processes from news and social media and other geospatial information. This information is beneficial for asset managers to improve their alpha-generating the capacity to boost the performance from structured time series and accounting information. The information collected from the social media sites when integrated with the sophisticated analytical tools proves to provide the added return to investors. Alternative data in the finance sector comprises data, used to extract financial and modern insights to improve alpha generation. The data sets are created through multiple digital and non-digital information resulting in financial transactions, or satellites.

Alternative data delivers additional alpha for sophisticated investors with better information quality. Finding the sources of factual information is the objective in finance, and alternative data is a new manifestation of this crusade. Alternative data guarantee maximum returns for investment managers who are looking for new opportunities. The challenges of embracing and practicing alternative data are significant, and investment managers are taking dynamic steps to utilize the possibilities presented by the data.

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