As companies around the world continue to be disrupted by logistics bottlenecks, institutional investors are searching for new sources of alternative data on supply chains to help inform their future investment decisions.
“Alt data” are current, unique sources of data gleaned from third-party sources, which can provide valuable explanatory power to both quantitative and fundamental investment models.
Coalition Greenwich, in a recent study of asset managers in North America, found that 44% of institutional investors currently use alt data, while an additional 24% plan to adopt alt data in the near future.
Coalition Greenwich also found that as they do so, 48% of investors plan to source alt data on supply chains. Meanwhile, another 41% are looking at employing alt data on the related category of logistics.
“Those percentages make supply chain by far the most popular topic for alternative data right now, well ahead of other categories like business-sector performance metrics, search trends and social media sentiment,” said David Easthope senior analyst for Coalition Greenwich Market Structure & Technology.
Investors currently believe alt data on supply chains will provide them with an edge; however, employing alt data is a difficult task. Alt data needs to be normalised, interpreted and incorporated into investment and portfolio construction processes.
Only until recently, investors tended to source their own alt data or purchase raw data from external providers. Data vendors and aggregators are, however, increasingly providing not only normalised data, but also tools, techniques and expertise to enable the data provided to be more useful in investment models.
In addition, technical support for data integration, as well as access to data scientists who can help analyse alt data, is starting to be provided.
“Alt data is about more than just the data,” continued Easthope. “Vendors and aggregators must go beyond simply providing data and help remove obstacles and otherwise support investors in their use of alt data.”