| November 27, 2019
Institutional investors earmarked RavenPack as the data vendor they would most likely use in the future, according to a survey by MachineByte, a platform dedicated to spreading the word about alternative data in finance.
In a recent report from MachineByte, 61% of the institutional investors surveyed said they were considering purchasing RavenPack data over other vendors in the next 12 months.
This put RavenPack at the top of a list of over a thousand other alternative data vendors, with Quandl coming second on 59% and Refinitiv third with 58%.
RavenPack’s performance was all the more impressive considering it beat two companies who are data generalists offering multiple datasets whereas
is a specialist in providing news and sentiment data metrics.
The environmental, social and governance sphere (ESG) was viewed as the area of greatest growth for the sector in the future, according to the survey, which interviewed a total of 103 institutional investors.
Yet alternative data is already being used to enhance ESG, by, for example,
optimizing ESG portfolios
, as shown by a recent RavenPack study.
Another application of big data in the environmental sphere was to use satellite imagery for rapid assessment of natural disaster impact, such as that provided by vendor RS Metrics.
80% of investors are expecting to increase deployment of alternative data, but the actual share of capital allocated remains small, with only 5% of respondents allocating over $1bn to alternative data-driven strategies when half had more than $50bn total AUM.
Equity trading remained the biggest use of alternative data by asset class. A fact we have found reflected by our clientele here at RavenPack.
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Quants are more likely to use alternative data than fundamentalists - by a ratio of 3 to 1.
The marked preference amongst quants suggests big data is not suited to application within fundamental decision-making processes. A study into the use of RavenPack’s sentiment data in the
by Empirical Research Partners, however, showed applications for both quantitative and fundamental investors.
The greatest use of alternative data was for strategy idea generation, with 32% of investors saying they primarily used the data for that purpose.
Next came Risk Management with 22%, and in third place came Portfolio Construction with 21%.
In relation to the use of alternative data for risk management purposes, research has shown strategies employing RavenPack data have outperformed even sophisticated
risk models such as the MSCI Barra
The majority of investors said they will continue to source alternative data from specialist vendors, although almost a third, 32%, said they were considering generating alternative data themselves, and 7% from investment banks.
Companies may even be able to leverage the value of their own internal data, contained within employees’ email inboxes and chat conversations, with a recent case study by RavenPack showing how one hedge fund used their
internal content to generate a new source of higher alpha
Other key findings were that
is the leading bank using alternative data in its research,
the leading hedge fund, and
Marcos López de Prado
is the leading academic.
In terms of reach, 38% of global hedge funds and institutional investors do not yet employ alternative data, according to the survey.
The least likely to be using alternative data are sovereign wealth funds, family offices, and pension funds; the last group, however, are the most likely to consider adopting alternative data in the future.
In the case of pension funds, for example, who are restricted in their ownership of riskier assets, there may be a perception data can be of limited application.
As a recent study by RavenPack highlights, however, its sentiment data can be put to use predicting changes in the
Italian BTP-German bund spread, suggesting the data can provide value for bondholders too.
The relatively high cost of the data and attracting the talent to use it were seen as two major challenges facing the industry.
A lack of case studies explaining how the data could deliver alpha, inadequate sample sizes, insufficient historical depth, and lack of understanding of how users applied the data, were highlighted as further areas for improvement for the industry as a whole.
The overall quality of the data was seen as key in deciding whether to purchase it - but also difficult to assess.
Issues of data quality were recently raised by Armando Gonzalez, CEO of RavenPack, who gave a keynote speech on the subject at the Battlefin Discovery Day 2018.
10 Tips to Avoid an Alternative Data Hangover
”, Armando lists potential pitfalls, including the risk that some data may be sold raw and unstructured, that many alternative data vendors cannot provide data with a long history, and some providers had no research proving their data can add value.
In the case of RavenPack, clients subscribe to data which avoids the 3 pitfalls mentioned above, since it is pre-structured, goes back 19 years, and there is plenty of independent research proving its worth. If you want to trial RavenPack data, email us at
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We consider incorporating sentiment signals from news, earnings call transcripts, and insider transactions to
boost the risk-adjusted returns, and revive factor performance.
We find stronger, more predictable market reactions when the words of company executives agree with their actions.
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