Unorthodox Data Commands Premium Price From Investors

Media Coverage May 15, 2019

Full article available on Forbes
By Yizhu Wang

Summary 

What kind of data can help hedge fund traders and portfolio managers decide when to to be short and when to go long? Earnings transcripts? SEC filings? Sure, but also, perhaps, where the company’s jets fly their top executives.

In January 2017, one week prior to Johnson & Johnson’s announcement of its $30 billion acquisition of Switzerland-based Actelion Pharmaceuticals, the Johnson & Johnson jet stayed parked near Actelion for five days, according to Quandl, a New York-based alternative data company whose database turns corporate aviation information like this into actionable insights for financial professionals.

For years, market participants such as investment banks, exchanges, and hedge funds have been poring through data to build a competitive edge in quantitative trading and investment management, but more recently, they’ve been turning to an emerging group of fintech data vendors using more advanced analytics and extensive data sources.

Fintech companies that specialize in making data relevant for investment purposes have attracted strong equity investment and M&A activity from strategics and private equity investors. Quandl, as an example, was acquired by Nasdaq last December.

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Alternative data is also being applied to environmental, social, and governance (ESG) analytics, Pedone said. San Francisco-based Truvalue Labs helps buyside firms calculate the social impact of their investments. While incumbent companies such as MSCI, Institutional Shareholder Services (ISS) and Bloomberg offer tools for ESG analytics, Truvalue Labs has a niche in leveraging alternative data, Pedone added. Truvalue Labs’ data sources take non-financial information into consideration, such as blogs, news stories and social media.