Do a company’s financial metrics – its balance sheet, income statements, EBITDA and the like – tell you everything about its future potential? Or are there other, perhaps overlooked measures – smartphone app engagement, for instance – that can give you sharper insights into its growth prospects? That is the high-level thinking driving the growing popularity of alternative data in investment research and analysis. Asset managers seeking an edge in the quest for alpha are looking beyond traditional financial data to identify opportunities or even risks that their competitors might not see.
The idea is that alternative data does not replace traditional data, but rather augments it, giving analysts a more complete picture of a target company’s fortunes or potential pitfalls. The challenge is that alternative data is often costly to acquire and difficult to apply effectively. Many firms lack the time and resources to clean the data and integrate it into their analytical and decision-making process.
Recently, our Tech It Up podcast team caught up with Matt Carroll, SS&C’s Head of Data Lens Sales and Partnerships. SS&C Data Lens is an initiative aimed at delivering an end-to-end data procurement, management and curation solution, one that emphasizes alternative data, but also incorporates traditional data. Put more simply, the platform makes it easier for firms to access and use alternative data, and to develop a 360o data science strategy.
Matt speaks from extensive experience. He spent the early part of his career in asset management firms, seeing firsthand how analysts and portfolio managers worked with data. That led him to dive deeper into the alternative data space, which eventually brought him to SS&C. He says that hedge funds are the real pioneers of alternative data adoption, especially heavy quant firms that have devoted substantial budget to build it into their processes and infrastructure. It is also making inroads into private equity. And traditional, long-only asset managers are exploring it in growing numbers. For smaller firms, the chief barriers to adoption are costs, lack of expertise and technology constraints – barriers that SS&C is working to help firms overcome through the Data Lens project.
If you’re wondering how your firm might benefit from alternative data, and how you can take advantage of it, listen to this episode of Tech It Up as a starting point, and contact your SS&C Advent representative to follow up on SS&C Data Lens.