The Convergence of Investment Research and Alternative Data


In the past year or two, a number of consultants have heralded the growing importance of alternative data to asset managers’ research process.  Simultaneously, many analysts have suggested that the traditional research industry is struggling due to pressures brought on by MiFID II.  However, we see the research and alternative data industries converging as firms try to provide investors with unique insights and signals.

Alternative Data Firms Add Insights

Readers of ResearchWatch are well aware that Integrity Research has provided significant and growing coverage of the alternative data industry over the past few years as asset managers have increasingly focused on nontraditional data as a source of potential returns.

However, one of the key barriers to the growth of this industry is the fact that a large percentage of asset managers currently do not have the resources and expertise to integrate this data into their research process and to produce usable insights from it.  This is particularly true for investors with a fundamental research process.  This fact has driven a number of alternative data firms to add value to the data they collect by producing relevant KPIs, analytics, and even fully formed research and investment insights for the large number of “quantimental investors” looking to add a quantitative overlay to their fundamental research process.

Alternative data firms 7Park Data and Thasos Group have created businesses aggregating and cleaning third-party data, and producing key investment metrics for relevant industries and companies.  Earnest Research integrates credit and debit card data into their platform to specifically produce insights and analysis of sales, orders and purchasing trends that should impact consumer-oriented stocks.

Due to demand from hedge fund clients, Yipit initially founded as an aggregator of online daily deal sites, decided to launch YipitData to collect website data on a broader set of online companies.  YipitData’s product, using publicly-available data on company and other websites, has expanded to include reporting on company metrics, assessing progress of long-term strategic plans, providing data around company developments and informing investors on trends in the data.  The firm provides fundamental data and analysis for 60+ companies in 7 sectors.

Founded in 2003, Majestic Research (now known as M Science) was a pioneer in the alternative data space, selling primary research based on large commercial databases which Majestic typically licensed on an exclusive basis.  Majestic added research analysts to provide clients with research and insights based on the information, without buy/sell/hold recommendations, a formula which it now continues as M Science.  The firm currently produces coverage on 174 companies across the groceries, restaurants, leisure, retail, airlines, electric vehicles, consumer technology, e-commerce, media, semiconductor, software & services, and telecommunications sectors.

Alt Data Driven Research Expands

While the alternative data industry has grown in recent years, the traditional research industry has shrunk sharply as MiFID II has forced asset managers to pay defined prices for the sell-side and independent research they use.  One might expect this dynamic to dampen research firms’ willingness to innovate.  However, this has not been the case as a number of investment bank and independent research firms have enhanced their products in recent years by adding insights driven by alternative data sets.

Over the past six or seven years, investment banks Morgan Stanley and UBS have been slowly adding various types of alternative data to their research offerings through their AlphaWise and Evidence Lab units.  However, UBS has continued to invest heavily in its Evidence Lab unit, with sources saying that nearly one fifth of UBS’ research budget is currently being allocated to it, with estimates that the group will employ 160 staff by the end of the year.

Other bulge bracket banks have taken notice of UBS’s success and are expanding their alternative data capabilities.  Goldman Sachs offers a separately branded service, GS Data Works.  JP Morgan has been hiring data scientists and engineers in a standalone unit, Roar Data.  Bank of America/Merrill Lynch reportedly has been investing in alternative data but has not launched a branded product.  Barclays recruited Buzzfeed’s lead data scientist to hire a team of data scientists.  RBC launched RBC Elements with six data scientists and specialists.  Cowen has launched its own alternative data unit called Kyber Data Science.

Independent research firm, Consumer Edge Research, announced its own alternative data unit called CE Insight, when it launched its own credit/debit card transaction product earlier this year.  Since then the firm announce a deal with geolocation provider Advan Research.  CE Insight was an extension of Consumer Edge’s exclusive deal to market the restaurant data service Black Box Intelligence in 2011, and their deal with Prosper Insights and Analytics that was announced last year.

A few years ago, independent research firm Wolfe Research, hired highly regarded quantitative analyst Yin Luo from Deutsche Bank as a Vice Chairman heading its quantitative research, portfolio strategy, and economics products.  Subsequently, the firm inked a distribution deal with satellite analysis firm RS Metrics in response to the increasing importance of alternative data in fundamental analysis.

Exante Advisors, a research boutique founded by Nomura Securities FX strategist Jens Nordvig, provides macro-thematic research, capital flow analysis, and data-driven and probabilistic investment and trading strategies. The research approach is cross-asset, but with particular emphasis on currency and interest rate expressions of macro views.  Shortly after starting his research boutique, Nordvig launched a big data startup, Exante Data LLC, offering proprietary data, models, and other relevant solutions for professional investors.

A Bigger Opportunity

Various consultants estimate that current spending on alternative data ranges from $300 million (Greenwich Associates and TABB) to $650 million ( – about 4% of the approximate $9.5 bln attributable to buy-side spending on investment research and market data in 2017.  This total is projected to reach from $900 mln to well over $1.2 bln by 2021.

However, what is particularly interesting about these totals is the fact that asset managers’  budgets for research are completely separate from their budgets for alternative data and the related infrastructure required to support it.  In addition, a number of the clients looking to purchase alternative data sets like quantitative investors, have traditionally not been purchasers of investment research.

Ultimately, what this means is that data providers who offer research, or research providers who also offer data have a potentially larger number of clients and larger potential budget to fund the purchase of their products or services.


Although asset managers have reduced their spending on sell-side and independent research in the past few years, many firms have sharply increased their spending on alternative data sets as they look for innovative sources of investment insight.

What is particularly interesting about these divergent spending trends is the fact that many of the firms offering alternative data are increasingly providing research and insight, while a growing number of research firms are becoming more prominent sources of alternative data and related insights. Clearly, the investment research and alternative data industries are converging.  The big question that remains is where this will leave the firms that specialize in only providing data or research?  We suspect these firms will be left with an ever shrinking market opportunity.



About Author

Mike Mayhew is one of the leading experts on the investment research industry. In addition to founding Integrity Research, Mike is on the board of directors of Investorside Research Association, the non-profit trade association for the independent research industry, and a frequent speaker on research industry trends and developments. Mike has over thirty years of research industry experience. Email:

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