Hedge funds are poking through all manner of alternative data like Twitter feeds, job postings, or Fitbit usage to gain that necessary trading edge that would spell success in tough markets.
Hema Parmar filed this report for Bloomberg:
“There is not one major hedge fund or asset manager that doesn’t have data initiatives underway or that are not using alternative data in some way,” said Michael Marrale, chief executive officer of M Science, a firm that provides data and analytics to hedge funds.
Spotting trends and patterns in consumer habits is big business, part of a global market for big data, that a JPMorgan Chase & Co. report said could reach more than $200 billion by next year. Still, there’s no guarantee all that information will lead to riches. It needs to be scrubbed, organized and aggregated to be of any use. Here’s some data that funds are watching.
- WiFi and Bluetooth connections have become so ubiquitous they’re often taken for granted. But hedge funds have become keenly interested in tracking devices that connect to the internet.
- Data culled from mobile-phone use can reveal, in real time, the number of people carrying devices at a particular location. This can shed light on how many — or few — people are frequenting a retailer, supermarket or fast-food joint.
- Hedge funds have set up internal units to scrape the biggest warehouse of information there is: the internet. They’re sifting sites to create bespoke collections of public data. Some examples include pricing trends on airline flights or hotels, inventory figures for products offered on coupon website Groupon, or sales posted for merchandise on Amazon.com.
- How often are people tweeting about Apple’s newest iPhone? Is the latest Nike sneaker a hit with teens? Firms have started tracking key words or phrases on social-media sites including Facebook and Instagram to gauge what consumers are thinking.
- Consumer transaction data has been widely used for years, whether it’s tracking what and how much people charge to their credit cards, receipts sent to email inboxes, or which sites accept online payment services like Venmo.
- Firms can collect reams of information on job postings, changes in compensation and employee reviews of companies. They can scrape websites like Glassdoor or dig through the IRS notices employers file on their benefit plans.