Some hedge funds use their deep war chests to allow the purchase of otherwise unavailable alternative data to gain an advantage over the competition.
Jeff Kearns filed this report for Bloomberg:
Some of the world’s biggest hedge funds are leaders in snapping up large swaths of alternative data, many paying big money for it. Investment firms that use so-called quantitative strategies can pump the raw data directly into algorithmic trading models. Trying to get an edge is as old as investing itself, but the profusion of alternative data sources — for those investors who can afford them — can offer faster and more detailed analysis than the government economic reports released on a monthly or quarterly basis.
The number of providers has tripled in three years to 1,126, according to Eagle Alpha Ltd., an alternative data provider that projects global spending will reach $900 million by 2021, nearly double the 2017 level. (AlternativeData.org, which collects information on the industry, puts the number of providers at 445.)
Players include NPD Group Inc., which says it crunches millions of receipts from brick-and-mortar stores and e-commerce sites to analyze consumer trends; Quandl Inc., which used aircraft-tracking data to sniff out a deal in the works between Occidental Petroleum Corp. and Buffett’s Berkshire Hathaway Inc.; Thasos Group, which measured overnight smartphone activity inside Tesla Inc.’s headquarters to anticipate a surge in production of its Model 3; satellite tracking firms Orbital Insight Inc. and Ursa Space Systems Inc.; and Predata Inc., which vacuums up data from online conversations and comments to feed country-specific “geopolitical risk” indices. (Bloomberg LP, the parent of Bloomberg News, provides clients with access to alternative data.)