Investment manager budgets for alternative data are set to increase further this year building on strong growth in the past two years, new research from leading alternative data platform Exabel and BattleFin shows.
Around 85% of investment managers and analysts questioned in the global study say budgets will rise this year with a third (33%) forecasting substantial growth, Exabel and BattleFin’s report Alternative Data Buy-side Insights & Trends 2025 found.
That builds on recent expansion in budgets, the global study with fund managers in the US, UK, Hong Kong and Singapore with total assets under management of $820bn found. More than two-fifths (43%) questioned reported a budget increase of between 50% and 75% over the period while 36% said budgets had grown by between 25% and 50%.
The research report from Exabel, which was acquired by alternative data provider Battlefin in December last year, found a key area for growth in budgets is likely to be third-party software systems for analysing data.
Currently two-thirds (66%) of firms questioned use third-party software as part of their range of solutions compared with 51% who use in-house built systems and 51% using systems provided by data vendors. The research, however, found 59% still use basic tools and other legacy systems such as Excel and Tableau to analyse alternative data.
That looks likely to change though, with 85% of respondents predicting their use of third party systems will increase over the next five years, and 15% predicting a dramatic increase in their use for analysis. Cost effectiveness is the driving force with 87% of those surveyed citing that as the reason for increased use of third-party software systems, while 62% identified a more consistent way to work with different types of data. More than half (52%) say their-party solutions are more effective than in-house systems.
Senior management at firms questioned are supportive of increased budgets – almost all (98%) are very or quite committed to using alternative data for investment research. More than four out of five (84%) have an alternative data lead with just 11% admitting they do not.
When allocating budgets for acquiring and managing alternative data, the survey found around 62% allocated between 25% and 50% of their resources to purchasing the data while 45% say their firm allocates around 25% to 50% of the budget to technology and software. Nearly half (49%) indicated that their firms allocate 10% to 25% of the budget to headcount for analyzing and managing alternative data.
