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Rise of the data factory – A new era for ‘Alt Data’

Dale Richards, RoZetta Technology

As the data market moves forward, organizational leaders have broadly embraced utilization of new technologies, new data sets, and smart strategy decisions. We are on the cusp of the next phase in decision making, fueled by deep analytics – driven by a relentless marketplace for greater decision insight and confidence. A key accelerator in this evolution will be the emergence of a powerful new model providing ‘data factories’ or managed data services.

THE MARKETPLACE FOR ALTERNATIVE DATA (ALT DATA)

The financial world is now acutely aware of the benefits of using alternative or new sources of data for analysis in investment thesis, alpha generation, insight, strategy, risk management, investor relations, etc. ‘Data driven’ strategies are now considered business as usual.

Forbes, Citibank, JPMorgan and many other leading research firms have recognized the opportunities of Alternative Data (Alt Data), whilst leading hedge funds (e.g. WorldQuant, Citadel, Blackrock) have long stayed ahead of the curve investing in data hunters, proprietary tech, big data, quant and analysis tools.

Leading broker and value-added aggregator firms like Eagle Alpha, Quandl, Battlefin and Neudata offer services and host numerous global conferences with hundreds of sellers and buyers eager to connect and learn how to maximise the use of new data sources. Traditional data vendors (eg. Refinitiv, Bloomberg, Factset, S&P) and exchanges (eg. CME, Nasdaq) have also added limited alternative data to their content mix.

Firms like Eagle Alpha, with a catalog of 1,200+ sources, are predicting that within 2 years there will be 5,000 sources of new data available for analysis. Even cloud infrastructure firms (eg. AWS, Databricks, Snowflake) are coming to the table to offer data exchange platforms.

The market for Alt Data is growing quickly, with widespread recognition of the trends and opportunities.

MARKET EVOLUTION

In this environment and with this backdrop, the market is now set for three major changes:

1.     The Alt Data Market is set to transcend the initial early adopters of so-called data-capable quant shops that have invested in teams of data scientists and internal platform tech.  New data will now be far more broadly demanded, needed, and used by ALL segments of the market (quants, discretionary funds, PE firms, corporate clients);

2.     Alt Data is no longer considered “alternative” and discretionary – it is now considered just “data”. There is no longer a choice to ignore it. CDO’s on both sides of the marketplace (buyers and sellers) are launching Alt Data teams;

3.     New tools such as NLP (Natural Language Processing) are set to unearth huge locked vaults of unstructured data. IoT (Internet of Things) sources are exploding and corporate CDO recognition of the value of data to stock value is rising sharply.

TRANSITION TO THE CLOUD DRIVEN BY NEW DATA SETS AND DATA USER DEMANDS

For the majority of new market of data users, it is not a viable choice to spend millions of dollars on an internal proprietary platform or teams of data scientists per the strategy of early adopter quant hedge funds.

Cloud service providers enable storage and data lake management with valuable base-level infrastructure. However, the deep domain knowledge and requirements to make sense of the data and connect it to traditional data for analysis is very challenging.

A new generation of financial and corporate data consumption will see firms investing in data scientists. Beyond the Cloud infrastructure players, there is a clear need for ‘data factories’ with scalable pre-fabrication capabilities to manage and structure Alt Data in order to productively support clients and scale the industry.

CDO’S IN THE NEW WORLD

The disruption caused by cloud adoption provides an efficient mechanism to hold immense amounts of data, significantly more effectively, than the legacy server systems. Cloud environments also provide many generic tools that can be used to manage the data from an engineering sense. However, for the vast new market of data originators, the ‘farm to table’ value chain (moving data from discovery, to extraction, to structure, mapping, value creation, manufacturing new data, delivery, support) is an entirely new experience.

The expectations of a data producers is evolving as we enter the API economy. Both sides of the data market require much more than cloud delivery and access to raw data via R & Python. Requirements include:

  • Extracting data
  • Platforms for curated delivery and user consumption
  • Data science knowledgeable in capital markets to structure and unlock value from the data
  • Mapping the data to traditional foundational financial data
  • Masking and anonymizing data
  • Go-to-market strategies and connectivity across numerous channels
  • Creating derived data (e.g. combining data with other data, analytics, signals, and benchmarks)
  • Staging the data for view or sample by consumers

CDO’s in this new world are faced with strategic decisions along the entire ‘monetizing’ spectrum. With Alt Data no longer discretionary, it is now at the forefront and a must-have for effective data driven strategies.

Advances in accessible tools and environments is opening significant opportunities for leading CDO’s who understand how to create maximum leverage, insight, and competitive advantage in the data economy.

RoZetta technology works with organizations and owners of data, leveraging the power of world-class cloud analytics platforms, tools, and data science to bring tangible value to an organization.