Investors Love Alternative Data, But Will It Remain "Alternative?"

As hedge funds and asset managers seek to boost returns and explain their strategies to clients, they are increasingly turning to alternative data sources. Investors are spending nearly $183 million annually on such data alone, according to a Greenwich Associates study. Tabb Group estimates the industry could more than double in size in the next five years, while a JPMorgan study shows that all in the buy side could be spending from $2 to $3 billion annually when hardware and analytic costs are considered. Despite the high costs, those purchasing the data are overwhelmingly satisfied, with a Quinlan & Associates study noting a meaningful increase in profit margins of up to 35% those firms using alternative...