Lowenstein Sandler’s Investment Management Group announces the release of Alternative Data Poised for More Growth in the Age of AI: The 2024 Lowenstein Sandler Alternative Data Report, authored by Scott H. Moss, Chair of Lowenstein’s Fund Regulatory & Compliance practice and Co-chair of the firm’s Investment Management Group; Boris Liberman, Co-chair of the firm’s Derivatives & Structured Products practice; and George Danenhauer, counsel in the firm’s Investment Management Group.
Over the last six years, investment management professionals have steadily increased their use of alternative data to improve decision-making, optimize portfolios, improve due diligence, and boost returns. Now, with widely available artificial intelligence-powered tools at their fingertips, they are poised to analyze exponentially more data to extract more valuable insights.
Since 2019, Lowenstein Sandler has surveyed investment advisers for hedge funds, private equity firms, and venture capital funds to understand their use of alternative data. Now a global market estimated at over $9 billion, alternative data includes forms of information not contained in company filings, press releases, analyst reports, or other traditional sources, such as credit card transactions, geolocation, and mobile device data.
This year’s survey results offer a valuable snapshot of alternative data’s evolution and integration into the investment management industry. Notably, 67 percent of respondents say they are using alternative data, an increase of five percentage points from 2023 and more than double the 31 percent from 2022. Moreover, 94 percent of current alternative data users plan to increase their budgets allocated to it.
“Alternative data is no longer novel, but the combination with AI creates the possibility for original insights at a scale and speed that was previously unattainable,” says Moss. “We have entered a new era of investment that will be shaped in large part by technology’s exploitation of data.”
The rapid adoption of the use of AI, including around investments and trading, highlights the need for robust policies and procedures governing the use of AI by investment firms. These policies and procedures need to be tailored to the firm’s uses of AI in its operations and provide for legal and compliance approval and oversight over the use of AI, particularly where AI may be used as part of the investment decision-making process.
Key findings:
- 67 percent of respondents said they are currently using alternative data, compared with 62 percent in 2023 and 31 percent in 2022.
- 94 percent of current users plan to increase their 2025 budgets for alternative data, with more than six in ten of those projecting an increase between 11 and 25 percent.
- 61 percent are using AI to help with investments and trading.
- 85 percent of respondents using AI for investment research/portfolio/trading believe they will use it much or somewhat more in the coming year.
Lowenstein Sandler LLP is a leading advisor on legal and compliance issues surrounding the use of alternative data and AI. The firm conducted similar surveys in 2019, 2021, 2022, and 2023.
About Lowenstein Sandler LLP
Lowenstein Sandler LLP is a national law firm with over 350 lawyers based in New York, Palo Alto, New Jersey, Utah, and Washington, D.C. The firm represents leaders in virtually every sector of the global economy, with particular emphasis on investment funds, life sciences, and technology. Recognized for its entrepreneurial spirit and high standard of client service, the firm is committed to the interests of its clients, colleagues, and communities.
