Alternative Data In ‘Early Adoption Phase’ for Asset Managers, BofA Says

The use of alternative data for asset management has grown in popularity, but the industry is far from a complete adoption, Bina Kalola head of global strategic direct investments for global banking and markets at Bank of America, said during the Future of Fintech Conference this morning.

“Data is being created everywhere and everyone’s going to try and monetize it,” she said. “Deciding which ones will be most relevant in the investment decisioning is critical, but I think the industry is still not in the data commoditization stage, but rather in an early adoption stage.”

A lot of the times, hedge funds find it difficult determining which type of data is valuable, Matthew Granade, chief market intelligence officer at Point72 Asset Management, added. “People try to sell us all sort of stuff, but the name of the game is being able to sort through these datasets and know which ones good or bad,” he said.

That game also requires a “massive” compliance operation, in order to determine the sources of the provided data, Granade said.

One vendor told me they had put a sensor on every oil well in America, and wanted to sell the valuable data. Well, our lawyers found out that even though he did have sensors on those wells, he never asked anyone for a permission to place those sensors. So you have to be very cautious.

There’s still an opportunity to introduce new alternative data sources to the investment decisioning, Kalola continued. “There are two that I see in development that are hugely interesting: extracting sentiment and tone, not just a dictionary of words, and transcription of voice. The standard for that now is 80% accuracy,” she said.

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