US financial services firms lead UK in alternative data integration, study finds

Apr 14, 2021
Hedge funds also more likely to use alternative data than insurance companies or banks

Nearly eight out of 10 financial services firms in the US (77 percent) find it easy to integrate alternative data into their decision-making processes, compared with 49 percent of UK-based firms, according to research from Bright Data.

Around three quarters (74 percent) of hedge funds have integrated alternative data into their processes, compared with 72 percent of insurance companies and 57 percent of banks, the study finds.

Of the firms that use alternative data, 24 percent say they use it every day. The most commonly cited reason for use is investment decision-making.

But respondents that frequently use alternative data say its application isn’t perfect, citing data analysis and sourcing as two challenges they face. Survey respondents also indicate that they would like more meaningful data on competitive intelligence and customer data from alternative data sources.

Bright Data CEO Or Lenchner says in a press release that IR teams should be aware of how financial services firms are using alternative data and how it therefore shapes their understanding of a company’s story.

‘Gone are the days where quarterly earnings reports could be relied on as the main source of data for decision-making,’ Lenchner says. ‘Financial services institutions are seeking out alternative and external data for up-to-the-minute insights that provide the most relevant, reliable and accurate data available.’

Bright Data partnered with Vanson Bourne to survey employees from insurance, banking, quant funds and loan companies about their use of alternative data.

IR Magazine has previously reported on the use of alternative data by investors and analysts, for anything from weather patterns, flight trackers and satellite imagery to social media listening and customer sentiment.

In a 2019 article, one particularly extreme example stood out. An analyst at Gordon Haskett Research Advisors noticed that Occidental Petroleum’s jet had landed in Omaha, the hometown of Warren Buffet. Shortly after the analyst published a note titled ‘What was Occidental doing in Omaha?’, it was revealed that Buffet had taken a $10 bn position in the company.

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