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.
The results confirm that alternative data has entered a more mature phase of growth. No longer a novelty, investment professionals see it as an essential, albeit imperfect, tool needed to compete.
The range of alternative data used by investment firms remains wide. The sources that saw the biggest percentage point increases from earlier surveys came from cloud platforms (+17), app usage (+17), biometric data (+16), and web scraping (+20).
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