Friday, March 5, 2021
  • Setup menu at Appearance » Menus and assign menu to Top Bar Navigation
Advertisement
  • AI Development
    • Artificial Intelligence
    • Machine Learning
    • Neural Networks
    • Learn to Code
  • Data
    • Blockchain
    • Big Data
    • Data Science
  • IT Security
    • Internet Privacy
    • Internet Security
  • Marketing
    • Digital Marketing
    • Marketing Technology
  • Technology Companies
  • Crypto News
No Result
View All Result
NikolaNews
  • AI Development
    • Artificial Intelligence
    • Machine Learning
    • Neural Networks
    • Learn to Code
  • Data
    • Blockchain
    • Big Data
    • Data Science
  • IT Security
    • Internet Privacy
    • Internet Security
  • Marketing
    • Digital Marketing
    • Marketing Technology
  • Technology Companies
  • Crypto News
No Result
View All Result
NikolaNews
No Result
View All Result
Home Data Science

How alternative data is helping investors make smarter deals

February 10, 2021
in Data Science
How alternative data is helping investors make smarter deals
586
SHARES
3.3k
VIEWS
Share on FacebookShare on Twitter

It may not come as a surprise that the private equity and hedge fund industries were affected by COVID-19, albeit in opposing ways. According to PitchBook, U.S. private equity activity in 2020 totaled $708.4 billion over 5,309 deals, which represented year-over-year dips of 7.3% and 3.4%, respectively. For the first time since 2009, both deal-making value and count decreased. In contrast, the hedge fund market was luckier – in 2020, hedge funds produced their best return in a decade with 11.6%. After a decline in the beginning of the year from effects of the pandemic, hedge funds ended 2020 on a strong note. 

You might also like

A Plethora of Machine Learning Articles: Part 2

The Effect IoT Has Had on Software Testing

Why Cloud Data Discovery Matters for Your Business

Despite the difficulties of 2020, I predict that in 2021 there will be a rebound of fundraising for private equity firms and a continuation of strong momentum for hedge funds, thanks to an increased use of alternative data. During 2020, private equity activities increasingly relied on alternative data and we are already seeing a growth of 21% so far this year. 

In a nutshell, alternative data is made up of non-traditional data sources that can provide real-time insights into an organization or a firm. Examples include website traffic, social media activity or even something like import or export records. Essentially, it’s data that’s sourced from publicly available, online destinations and offers a much more immediate and creative way to identify the financial prospects of a company or market. Since it is up to private equity firms and hedge funds to be certain about the investments they are making, it certainly makes sense for them to turn to the largest source of information – the online sphere – to plan their investment strategy with certainty. 

How alternative data can be used for decision-making 

Alternative data has been gaining traction in the world of private equity firms and hedge funds. According to a recent report, 69% of hedge fund market leaders use alternative data to generate outperformance, and 23% use it for their risk management processes. While these numbers are strong, they still reflect the fact that alternative data has not fully been adopted by private equity and hedge fund managers. This could be attributed to some misconceptions about the data collection process. 

Since private equity firms are involved with a wide range of deals, they’re constantly looking to collect trustworthy data. And, since private equity firms are often handling large-scale deals (compared to smaller investments from venture capital funds), it’s all the more important that investors are using alternative data to back up their decisions. 

On the hedge fund side of things, both fundamental and quantitative fund handlers use alternative data to guide their decision-making and make sense of the market. Fundamental handlers can quickly absorb data to offer an immediate snapshot of the market. On the other hand, quantitative fund handlers focus more on market algorithms over an extended period of time. This means that as time goes by and more data is collected, quantitative funds have more information with which to make better sense of the market. The dual benefit of alternative data is that it can be used for creating snapshots as well as long-term trends. 

Alternative data is already being used to drive decision-making – and it’s showing impressive results. In 2020, hedge fund Sender Company & Painters gained 30% just by looking at real-time data on what stocks Robinhood users were buying and selling. In 2018, database company Thasos Group tipped off its hedge fund clients that Tesla was working around the clock to increase production of their Model 3 Sedan. How did they know? They tracked the smartphone location signals within Tesla’s headquarters and found a 30% increase in the overnight shift. This led to Tesla’s stock going up 9.1% the day after they released their quarterly profit at the time. 

These examples reflect one fact: alternative data is there to be utilized and can transform your results.   

How funds can collect alternative data 

When sourcing alternative data, it’s imperative that private equity firms and hedge funds have the most up-to-date, reliable data possible – otherwise, they could be basing decisions and deals off of information that’s no longer relevant and accurate. 

Alternative data sources differ from traditional data sources because they are typically rapidly updated in near real time rather than a few times a year. Traditional data, like company earnings, are no longer a reliable source on which to make decisions because they are considered out of date soon after being released. In today’s fluctuating market, data that’s even a week old can be irrelevant, let alone if it’s from the prior quarter. Basing decisions on outdated materials will almost always lead to poor choices. 

Using an automated data collector is an easy way to gather up-to-the-minute insights from publicly available data. Once the data is collected, funders can analyze it and make decisions based on their insights.  

If a private equity firm were to attempt its own data collection, I expect it would take one person at least a week to gather what an automated service could gather in minutes or hours. Compared to hiring a full-time data scientist to do the data collecting, online data collection providers are a much cheaper and cost-efficient option. In fact, for $10-$20, these providers can usually get the same amount of work done that a human would a week to do. 

And when it comes to a provider, I would verify they follow a well-defined ethical and compliance code to maintain a secure and reliable data collection network that abides by every regulation. When it comes to a data collection operation, even when focusing on publicly available data, looking “behind the scenes” is just as essential as the data collected – you simply don’t want to unnecessarily put your business at risk. 

After a tumultuous year, private equity and hedge funds are expected to come back stronger than ever. It therefore makes sense for investors to use every resource they have to gain an increased competitive edge in their investment strategies and to make smarter deals. Alternative data provides dependable information that can eliminate uncertainty and aid in reaching intelligent decision-making faster. Using an automated data collector is a hassle-free way for firms to collect this data, so all that’s left is for funders to analyze it with accuracy. As 2021 begins, hedge funds and private equity firms can feel rest assured that external data sources will shed a bright light on closing deals and selecting organizations to back financially.  


Credit: Data Science Central By: Or Lenchner

Previous Post

Visa partners with neobank First Boulevard for new crypto API initiative

Next Post

Microsoft Issues Patches for In-the-Wild 0-day and 55 Others Windows Bugs

Related Posts

A Plethora of Machine Learning Articles: Part 2
Data Science

A Plethora of Machine Learning Articles: Part 2

March 4, 2021
The Effect IoT Has Had on Software Testing
Data Science

The Effect IoT Has Had on Software Testing

March 3, 2021
Why Cloud Data Discovery Matters for Your Business
Data Science

Why Cloud Data Discovery Matters for Your Business

March 2, 2021
DSC Weekly Digest 01 March 2021
Data Science

DSC Weekly Digest 01 March 2021

March 2, 2021
Companies in the Global Data Science Platforms Resorting to Product Innovation to Stay Ahead in the Game
Data Science

Companies in the Global Data Science Platforms Resorting to Product Innovation to Stay Ahead in the Game

March 2, 2021
Next Post
Microsoft Issues Patches for In-the-Wild 0-day and 55 Others Windows Bugs

Microsoft Issues Patches for In-the-Wild 0-day and 55 Others Windows Bugs

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Recommended

Plasticity in Deep Learning: Dynamic Adaptations for AI Self-Driving Cars

Plasticity in Deep Learning: Dynamic Adaptations for AI Self-Driving Cars

January 6, 2019
Microsoft, Google Use Artificial Intelligence to Fight Hackers

Microsoft, Google Use Artificial Intelligence to Fight Hackers

January 6, 2019

Categories

  • Artificial Intelligence
  • Big Data
  • Blockchain
  • Crypto News
  • Data Science
  • Digital Marketing
  • Internet Privacy
  • Internet Security
  • Learn to Code
  • Machine Learning
  • Marketing Technology
  • Neural Networks
  • Technology Companies

Don't miss it

Convergence of AI, 5G and Augmented Reality Poses New Security Risks 
Artificial Intelligence

Convergence of AI, 5G and Augmented Reality Poses New Security Risks 

March 5, 2021
2021 Gartner Magic Quadrant for Data Science and Machine Learning Platforms
Machine Learning

2021 Gartner Magic Quadrant for Data Science and Machine Learning Platforms

March 5, 2021
With its acquisition of Auth0, Okta goes all in on CIAM
Internet Security

With its acquisition of Auth0, Okta goes all in on CIAM

March 5, 2021
Survey Finds Many Companies Do Little or No Management of Cloud Spending  
Artificial Intelligence

Survey Finds Many Companies Do Little or No Management of Cloud Spending  

March 5, 2021
UVA doctors give us a glimpse into the future of artificial intelligence
Machine Learning

UVA doctors give us a glimpse into the future of artificial intelligence

March 5, 2021
Labeling Case Study — Agriculture— Pigs’ Productivity, Behavior, and Welfare Image Labeling | by ByteBridge | Feb, 2021
Neural Networks

Labeling Case Study — Agriculture— Pigs’ Productivity, Behavior, and Welfare Image Labeling | by ByteBridge | Feb, 2021

March 5, 2021
NikolaNews

NikolaNews.com is an online News Portal which aims to share news about blockchain, AI, Big Data, and Data Privacy and more!

What’s New Here?

  • Convergence of AI, 5G and Augmented Reality Poses New Security Risks  March 5, 2021
  • 2021 Gartner Magic Quadrant for Data Science and Machine Learning Platforms March 5, 2021
  • With its acquisition of Auth0, Okta goes all in on CIAM March 5, 2021
  • Survey Finds Many Companies Do Little or No Management of Cloud Spending   March 5, 2021

Subscribe to get more!

© 2019 NikolaNews.com - Global Tech Updates

No Result
View All Result
  • AI Development
    • Artificial Intelligence
    • Machine Learning
    • Neural Networks
    • Learn to Code
  • Data
    • Blockchain
    • Big Data
    • Data Science
  • IT Security
    • Internet Privacy
    • Internet Security
  • Marketing
    • Digital Marketing
    • Marketing Technology
  • Technology Companies
  • Crypto News

© 2019 NikolaNews.com - Global Tech Updates