Alternative Data in Investment Management: A Perspective
Leveraging alternative data to gain insights for better investment strategies
In their quest to generate alpha, diversify investments, and minimize risks and costs, investment management firms are increasingly tapping into various sources of alternative data in financial services such as social media, weather reports, geospatial information, satellite imagery, and mobile geo-location data. Using insights gained from alternative data for investment decisions has the potential to generate exponential returns for investors. Hence, firms are employing data engineering, analytics, and machine learning techniques on alternative data to extract critical insights.
Using alternative data in investment management can help unlock value in various areas such as portfolio management, real estate and private equity, and investment advisory. While leveraging alternative data for investment decisions has tremendous potential to reimagine investment management, unlocking value from the humongous amount of alternative data will require firms to:
- Build an enterprise data platform
- Integrate alternative data into quantitative investment models
- Ensure data rationalization