According to a new study from fintech Exabel, over half (53%) of portfolio managers and investment analysts who focus on fundamental investing say an overload of alternative data and the difficulty in prioritising it, is the biggest challenge to extracting benefits from its use.
Some 21% meanwhile, say its quality is sometimes not good enough, while 15% of respondents surveyed by Exabel identified difficulties in integrating alternative data into their systems as their biggest challenge.
Alternative data is defined as non-traditional data that can provide an indication of future performance of a company outside of traditional sources such as company filings, broker forecasts, and management guidance. Exabel provides investors with a platform to make the most out of alternative data within their investment processes.
Extracting benefits from alternative data can be challenging though, according to Exabel’s survey, with just 28% of the investment professionals questioned thinking the funds they help to manage do a very good job in integrating alternative data into their processes. Over six out of ten (61%) believe they do this quite well, but one in ten (10%) describe their ability to do so as average.
While the use of alternative data is increasing, there is clearly still some way to go in how it is being used with just 23% of survey respondents ranking their organisation’s process for using it as ‘excellent’. Some 63% describe it as good, but around one in eight (12%) say it is average.
Neil Chapman, CEO Exabel said: “Our research shows that active investment managers are relying on alternative data more to support their investment research and strategies. However, our findings also reveal there are challenges that they face in terms of how they use this data and extracting benefits from it. Critically, with advances in domain specific technology, the insight that fund managers can derive from alternative data is increasing rapidly.”
