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Deadline Looms for Alt Data Skeptics

Tue March 19, 2019

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Portfolio managers have not missed the bus regarding incorporating alternative data into their investment strategies, but it is leaving soon, according to the experts.

Skeptics may think that it is too late since everyone is already using it and seeing the same signals, according to Olga Kokareva, head of data sourcing and strategy at Quantstellation and who spoke recently at an industry panel.

“It’s going to be too late because if you don’t use it …you will not be able to compete with everyone who is,” she noted.

For the past several years many in the industry have defined alternative data as non-traditional data that can help detect trading signals.

However alternative data can be viewed as new data that has never been available previously, such as online sentiment data, logistics data from package-delivery firms, or point-of-sale data. Other alternative data sets could be existing data that analysts view in a new way.

For some, “alternative data” is a misnomer for “specialized search,” which has been arduous to collect.

“They are using satellite images to count cars in parking lots,” said fellow panelist Barry Star, founder and CEO of Wall Street Horizon. ”Well, 40 years ago people went and counted cars in parking lots. Credit card receipts? People stood in stores with clickers and counted people going through check-out lines. It’s just a different way of doing what always has been done.”

Portfolio managers can find the ever-growing number of alternative data providers daunting, especially when they start dipping their toes into the water.