According to a new market research report published by Credence Research “Alternative Data Market (by Data Type – Sentiment Data, Geo-location Data, Credit/Debit Card Transaction Data, Satellite Data, Email Receipts Data, Web Scrapping Data, Web Traffic Data and Others; by Industry Verticals – Automotive, Retail Market, Energy, It & Telecommunications, Transportation & Logistics and Others) Market – Growth, Future Prospects, and Competitive Analysis, 2018 – 2026”, the global alternative data market accounted to hit value of US$ 226.50 Mn in 2017 and expected to witness immense CAGR across the forecast period through 2018 to 2026.
Alternative data is the collection, packaging, cleaning, modeling and distribution of large structured and unstructured data sources to improve investment returns and build predictive insights. Alternative data set to transform the face of investment management (IM) over the coming years. In the following years, IM companies have shown good intention to use social media, news feeds, online communities, satellite imagery, contact metadata and geospatial information for estimations.
The appeal of alternative data is largely the opportunity for a knowledge advantage over the investment decision market. Such data are gathered from interviews, news stories, TV press releases, blogs, conferences, web traffic, Internet of Things (IoT) devices, proprietary databases and government sets. Various industrial verticals draw on alternative information through sophisticated analytical techniques such as machine learning and cognitive computing.
The adoption of alternative data is primarily driven by the development of sophisticated programs that quickly analyze financial news, corporate interviews and social media sentiments. IBM reported that 90 percent of the alternative data available today have been produced over the last two years.
The international alternative data market is segmented on the basis of information form and industrial vertical. The alternative data market is mainly dominated by the web data segment due to the increasing demand for such data sources from both the sales side and asset managers, including hedge funds. Modern datasets are incorporated into the investment process as they provide more data and information than conventional datasets.
Financial firms aim to minimize potential legal costs as well as the headline risk associated with web crawling. North America was the largest alternative data market in 2017 closely followed by Europe, mainly due to early adoption of alternative data through various industrial vertical lines. According to Eagle Alpha Ltd., 78% of US hedge funds use alternative information for investment research. The alternative data market is moving towards the end of the early phase of adoption.
Nowadays, there are various companies experimenting with alternative data, and most of them are in the US. Nevertheless, other regions have started to catch up at a rapid pace. For example, there are approximately 40 discretionary firms in the Asia-Pacific market that have at least one dedicated alternative data arm.
The main driver for the adoption of alternative data across various industrial verticals is the eagerness to obtain information advantage over competitors. To obtain information advantage with alternative data, companies are trying out a number of ideas to find the one that really supports investment decisions. For continued success and to retain a market advantage, companies produce new investment ideas along with alternative data sets on a regular basis.
While alternative data is early accepted throughout the world, it may be at higher risk than traditional data sources, given the content of the data fields and the different ways in which it is collected and treated. Nonetheless, as consumers are more prone to reliability, alternative data are expected to show a huge growth rate over the forecast period from 2018 to 2026.