Hedge Funds Use Alternative Data for Covid-19 Edge

Hedge Funds Use Alternative Data for Covid-19 Edge

Alternative data, the multibillion-dollar industry that taps into unusual information such as satellite imagery and measurements of social media sentiment, is seeing a surge in demand as companies continue to battle the coronavirus crisis. This according to an article in the Financial Times.

The article reports that many investors have turned to the niche information “after finding official numbers too slow in reflecting the collapse in economic activity due to Covid, and the recovery.” It adds, “Providers argue it can provide precious, real-time glimpses into how a company or economy is faring.”

Accenture’s global  head of marketing Michael Spellacy reportedly said that hedge funds profited this year from activities such as comparing  social media posts in China with Chinese government statements “to gauge the extent of the virus’s impact, as well as collecting data on the movement of Chinese container ships to monitor activity.”

But the article reports that some managers question whether alternative data can prove helpful and worthwhile. Like Michiel Meeuwissen, co-head of alternative strategies at Kempen Capital Management, who argues that “common sense can at times be as strong or stronger.” And Anthony Lawler, head of GAM Systematic, who said his firm used alternative data but that it wasn’t the driver of last year’s or this year’s gains: “Daily credit card data or football data didn’t lead the recovery in [stock] prices,” he said. “What led the recovery was investor sentiment, animal spirits and a belief in a better future. For none of that could you use innovative photographic, credit card or shipping data.”

Feature Image Photo: Copyright: 123rf.com / gonin