Today’s hedge funds operate in an increasingly competitive market, where a good investment idea may no longer be enough to make it stand out in the crowd. Several trends are converging, driving hedge funds to analyze greater volumes of data, from more sources, faster, in hopes of generating better investment ideas that produce greater alpha.
Three Trends Driving Data Analytics in FinServ
First is the increased volatility in markets and across asset classes. Things are changing fast, and sometimes quite dramatically. Second is the availability of different types of data to use in analytic modeling for financial services. Firms no longer need rely solely on financial data, but can factor things like recent news, regulatory actions or patent filings into their analysis. In fact, sometimes, the biggest opportunities involve trading on the second derivative of the latest news, Bill Fearnley Jr, research director of compliance, fraud and risk analytics at IDC Financial Insights, explained in a recent Avere Systems webcast. Third, firms now have access to more data over longer time horizons, which helps them test models over a larger number of different market scenarios.