Alternative Market Data budgets doubling from $200 Million
Leading industry analysis firm Tabb Group is predicting that in the next five years spending for alternative market data will double from $200 million. This growth is driven by a diverse set of factors including an increasing use of alternative market data by asset management firms to the continued growth of hedge funds applying quantitative processes.
Asset management firms adopting quantitative hedge fund data
Quantitative hedge funds have long been users of alternative market data. These hedge funds are accustomed to seeking, and achieving results with data which provides an information edge. They employ teams of advanced data scientists to drive alpha through data asymmetry. As the wave of new providers in the alternative market data arena as well as broader adoption accelerates to an over $400 million annual spend, focus on vendor selection as well as low integration friction follow closely the priorities of alpha generation and risk management capability. Of particular interest in this current phase of exposure to the value of alternative market data providers is the increased interest by asset management firms. The article ‘Alt’ Data Providers Ready to Bloom, notes that “this trend is changing as typical asset managers overcome their complacency and incorporate big data into their strategies.”
Alternative market data providers ready for the accelerating growth
Alternative market data providers will be able to lead their clients to success as they adapt from providing data and services to purely quantitative hedge funds to more diverse asset management firms with a variety of strategies. Reducing integration friction, articulating full investment cycle value, and increasing global market participants’ awareness of the capabilities contained within alternative market data (such as news sentiment data or big data text transformation into actionable insights) will insure longevity and success for vendors in the alternative market data space.