An Alternate Reality?

The alternative data promise and struggles managers face

Gurvinder Singh, CEO and Founder, Indus Valley Partners
Originally published in the September 2019 issue

Alternative data has been labeled as a cure-all for the ongoing aches faced by asset managers, but in reality, these sets often do not generate numbers for managers to derive meaningful insights from. This typically comes down to the fact that far too many funds are zeroed in on the pure hype of the data and not its practical use case, which are most typically forged by domain expertise practices.

However, the rate at which firms are implementing alternative data sets into their investment process seems to have reached new highs as of recently. Global consulting firm Deloitte has noticed a unique uptrend of private equity and large investment management firms joining their riskier hedge fund counterparts in the use of these non-traditional data sets to generate new sources of alpha. The consulting firm notes that this adoption is at its tipping point with alternative data’s use growing at a rapid pace.1

As the industry continues to discuss the new hype of alternative data, it’s important to bring the conversation back to alternative data’s foundation. The most classic example of Alt Data 1.0 is the ADP’s National Employment Report payroll data. There was once a time that managers identified and harnessed ADP’s data to drive investment insights, but now it is ubiquitous across the industry and managers have moved on. This same struggle is playing out in today’s broader alternative data offerings and analysis capabilities. Managers are faced with an industry-wide democratization of both tools and capabilities, further leveling the competitive playing field.

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