Alternative Data

Investors seek an edge by finding information others do not have or have not yet analysed. Alternative data can provide early or unique insights into company performance, consumer behaviour and economic activity.

Examples include credit and debit card transaction data, satellite images of car parks, shipping routes or crop fields, mobile phone location data, web traffic and app downloads, online reviews, social media sentiment, job postings and product prices scraped from websites.

For example, an investment firm might analyse anonymised card transaction data to estimate a retailer's quarterly sales before the company reports them, or use satellite images of oil storage tanks to estimate global oil inventories.

Alternative data has become widely used by hedge funds and asset managers, but it raises challenges. Data can be expensive, messy and hard to interpret. There are legal and ethical concerns about privacy, consent and whether some data could count as inside information. As more investors use the same data, its advantage tends to diminish.