alternative-data-for-alpha-final.pdf

But on the trading floors of the worlds largest

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But on the trading floors of the world’s largest investment managers, the use of such data to make institutional investments is still in its infancy. While the data and related analytics are intriguing, historical performance results are still limited, leaving the hands of portfolio managers somewhat tied. Alternative public company data (i.e., credit scores and payment history) and private company data are seen as providing a huge edge in today’s market. Over 60% of asset managers participating in our study believe alternative public company data provides the most edge, while nearly WHAT IS ALTERNATIVE DATA? Business performance information that shows public companies’ payment experience (i.e., how they pay their creditors). Business performance of private companies and how it influences and predicts that of public companies. Corporate linkage providing a clear picture of total risk and opportunity across related businesses.
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5   |   GREENWICH ASSOCIATES 70% favor private company data. Hedge funds find edge in both of these data sets but are more focused on private company data, as it suits their generally more creative investment strategies. While alternative public and private company data are similar in nature, their use cases are more distinct. The former is primarily used by investors in public companies who want to understand their financial health in a way that public statements don’t allow. Alternative private company data, on the other hand, is generally used by either investors in corporate bonds who need to understand credit quality in more detail, or by public company investors who look to private companies as a leading indicator of public company performance. Understanding the supply chain of a public company represents one specific use case for alternative company data. For instance, let’s assume a large, public technology provider plans to release a new mobile phone that should dramatically impact earnings. That release will be hugely dependent on the delivery of various components from small, private suppliers all around the world. For investors in that public technology company, the ability to weed out details on a single supplier that may be under financial stress could have a dramatic impact on their investment strategy. To do this, the investor can look at shipping logistics data, court filings, the payment history of that private company to its suppliers, the company’s credit rating, and the size of its accounts payable, among other similar factors. Such data on a single company is interesting and can be useful, but across the entire supply chain of every company in a sector can create meaningful alpha. 3 2 4 1–No real edge 5–Most edge Asset Managers DATA TYPES PROVIDING THE MOST EDGE Note: May not total 100% due to rounding. Based on responses from 46 asset managers and 23 hedge funds.
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  • Fall '19
  • Financial services, Privately held company, Collective investment scheme

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