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Neil Chapman, Exabel
Neil Chapman, Exabel

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Study reveals effectiveness of investment managers’ use of alternative data

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A new study from fintech Exabel asked portfolio managers and investment analysts who focus on fundamental investing on their use of alternative data and found that just 23 per cent described their organisation’s process for using it as ‘excellent’.  Some 63 per cent described it as good, but around one in eight (12 per cent) said it was average.  

Alternative data, in this context, is defined as non-traditional data that can provide an indication of future performance of a company outside of traditional sources such as company filings, broker forecasts, and management guidance.  Exabel writes that it provides investors with a platform to make the most out of alternative data within their investment processes.

The process to extract benefits from alternative data can be challenging, the firm says.  Just 28 per cent of investment professionals surveyed by Exabel think the funds they help to manage do a very good job in integrating alternative data into their processes.  Over six out of 10 (61 per cent) believe they do this quite well, but one in 10 (10 per cent) describe their ability to do so as average.

When asked what the most significant barrier to extracting benefits from alternative data is, 53 per cent of investment professionals surveyed said there is too much of it and it is hard to prioritise, followed by 21 per cent who said its quality is sometimes not good enough. Some 15 per cent identified difficulties in integrating alternative data into their systems as the biggest challenge.

Neil Chapman, CEO Exabel says: “Our research shows that active investment managers are relying on alternative data more to support their investment research and strategies. However, our findings also reveal there are challenges that they face in terms of how they use this data and extracting benefits from it.  Critically, with advances in domain specific technology, the insight that fund managers can derive from alternative data is increasing rapidly.”

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