Alternative Data Management Market Size, Share & Trends Analysis Report By Data Type (Credit & Debit Card Transactions, Email Receipts, Geolocation (Foot Traffic) Records, Mobile Application Usage, Satellite & Weather Data, Social & Sentiment Data, Web Scraped Data, Web Traffic, Other), By Industry (Automotive, BFSI, Energy, Industrial, IT & Telecommunications, Media & Entertainment, Real Estate & Construction, Retail, Transportation & Logistics, Other), By End-User (Hedge Fund Operators, Investment Institutions, Retail Companies, Other End-users) and By Region(North America, Europe, APAC, Middle East and Africa, LATAM) Forecasts, 2024-2032

Market Overview

The global alternative data management market size is expected to reach a valuation of USD 164,362 million by 2030 growing at a CAGR of 58% during the forecast period (2022–2030).

Data intended to get insights into the investment process is alternative data. Hedge fund managers and other institutional investing professionals inside a venture capital firm frequently use these data sets. Alternative data sets are statistics about an organization given by third-party sources and can provide specific and relevant information on investment prospects.

The most significant benefit of adopting alternative data is that it allows businesses to compare, assess, and develop alpha. Alternative data can help a company better understand its competitors and the market and enhance performance.

Market Dynamics

Drivers: rising demand from investment management firms

Investment corporations are striving to increase their alphas or gains. Data analytics is the preferred weapon for acquiring competitiveness is pursuing alpha. Asset managers can glean valuable information from various internal and external information sources, incorporating alternative data sets. Alternative data is collected about an organization that is sourced externally and is often leveraged to generate extra business knowledge. It is often related to economic research. Credit card data and consumer sentiment, for example, can provide improved projections about a company's business performance when combined with conventional data.

It's being used by much more than 50% of portfolio managers to maintain a competitive edge by delivering improved performance and supporting risk management practices. More than 400 organizations supply alternative data to hedge funds, making a considerable contribution to market revenue. Alternative data is undiscovered information that isn't found in traditional sources like SEC filings, financial statements, news releases, or management presentations. It is gathered from various sources, including social media, online traffic, sensors, mobile devices, e-commerce portals, satellites, financial transactions, public records, etc.

Thus, gaining a competitive advantage and generating additional returns on the investments done by the asset management firms with the help of alternative data are likely to drive the market growth during the forecast period.

Drivers: increasing adoption of 5g networks with favorable government initiatives

5G networks will hasten the adoption of alternative data apps and services while also enabling software innovations. 5G's enhanced bandwidth enables more data to be delivered in a given amount of time, and its decreased latencies allow data to get to its target destination. These networks offer more coverage and accommodate diverse network topologies, allowing alternate data to be easily communicated. 

From smartphones and Internet-of-Things (IoT) devices connected, 5G will result in a rise in data traffic. Thus, the benefits of increasing the adoption of 5G networks across the globe are likely to drive market growth over the forecast timeframe.

In both developing and industrialized countries, government attempts to encourage innovative technology to influence the growth of the alternative data market substantially. They hope to promote secure internet access, preserve private information, retain privacy, and educate about advanced data science by collaborating with digital companies. Government actions are likely to impact the alternative data market during the forecast timeframe positively.

Restraints: lack of solution vendor and diversified requirements for alternative data

Buying sentiments from a data supplier has drawbacks: A black box algorithm determines the sentiment value. When text is converted to a number value, excessive data is lost. Quite so many users consuming the same information may weaken alpha. Data in text, like filings, research papers, and news, provides predictive and foresightful information. 

It can be used for investment analysis, asset management, theme trading, risk management, stock selection, and more by both the sellers’ and buyers’ sides. Vendors have significant problems due to the wide range of specifications and implementations, as it is challenging to pre-process it all and sell off-the-shelf products.

Major stable and market data solution companies make off-the-shelf frameworks and tools for database calculation, storage, and purification. In the alternative data space, however, things are different. When interpreting alternative data, investment banks and hedge funds are highly cautious. They often invest much more time and money in developing technical skills before moving on to developing business considerations. 

Since they focus on making standardized processing functionalities, the proliferation of solution vendors will indicate competence for leveraging alternative data. It will save money and speed up the development process for customers. Thus, the lack of solution vendors and diversified requirements of alternative data is expected to impede the alternative data management market growth during the forecast period.

What are future growth opportunities in alternative data management market?

• Alternative data as an enabler

With the majority of the consumer packaged goods (CPG) market migrating to a direct-to-consumer (D2C) business model, corporations are beginning to turn to their direct internet channels for immediate consumer feedback. Because consumers' behavior is getting less reliable, traditional customer analysis is getting less significant than data availability. However, with the amount of data collected globally predicted to twofold by 2025, these endeavors can appear frightening at first.

CPG corporations should engage in their alternative data approach and begin using other sources, such as video analytics, search volume trends, social media, and e-commerce data, to compete in this changing climate. Only a few businesses have fully realized the possibility of connecting internal information from operations with data from 3rd parties and other publicly available data resources. This may be a source of significant competitive edge in the future, presenting corporations with attractive growth prospects.

Which trends may impede alternative data management market growth?

• Esg performance and sustainability

Investors are becoming highly engaged in ESG, notably as officials, such as the European Commission, have advocated various strategies to better implement sustainability concerns in making investment decisions. This focus is projected to grow in 2021, as will individual investors' engagement in sustainability. In 2017, compared to 2012, 64.0% of active retail investors concentrated on sustainable investment portfolios.

However, since most investors have access to the same opportunities: the business sustainability reports, making a profit with ESG techniques has become more challenging. Another difficulty with this conventional data source is that the corporation itself reports the information that might or might not reflect reality. In 2021, investors were likely to get cleverer and use alternative data, like social media data, to uncover specific indications and develop potentially profitable strategies.

Regional Analysis

The global alternative data management market share has been segregated into North America, Europe, Asia-Pacific, South America, and the Middle East and Africa. 

With a market value of USD 109,136 million by 2030, registering a CAGR of 57%, North America is expected to be the most prominent alternative data management market. Various participants in the market, such as UBS Evidence Lab, M Science, Eagle Alpha, and Advan, are credited with the region's significant market share. 

The country's early acceptance of alternative data from many industrial verticals resulted in a significant market share. More than 70% of asset management companies in the United States consider using alternative data in their investment strategy.

Europe is expected to be the second-largest alternative data management market with a value of USD 47,640 million by 2030, registering a CAGR of 61% during the forecast period due to many alternative investments under management. These assets are primarily spread throughout multiple asset types, such as natural resources, real estate, hedge funds, and private equity. Asset management firms increasingly rely on alternative data to develop profitable alpha-generating methods.

Segmental Analysis

The global alternative data management market share has been classified based on data type, industry end-user, and regions.

The alternative data management market has been segmented into credit & debit card transactions, email receipts, geolocation (foot traffic) records, mobile application usage, satellite & weather data, social & sentiment data, web scraped data, web traffic, and others based on the data type. 

The credit and debit card transactions data type segment is expected to dominate the global market. It is projected to reach USD 33,973 million by 2030, registering a CAGR of 62% during the forecast period due to the data providers' extensive abilities to classify client spending by age, seller, region, gender, and other factors. Corporations combine transaction information with data to reveal unseen insights about consumer spending patterns, allowing investors to put their money into productive enterprises.

Which industry of alternative data management is projected to score highest growth in the coming years?

The alternative data management market has been segmented into automotive, BFSI, energy, industrial, IT & telecommunications, media & entertainment, real estate & construction, retail, transportation & logistics, and others based on industry. The BFSI industry segment is expected to dominate the global market, and it is projected to reach USD 30,961 million by 2030, registering a CAGR of 61% during the forecast period. 

The increased demand for meaningful data from various BFSI organizations, such as life insurance companies, unit trusts, pension funds, private equity funds, mutual funds, and hedge funds, can be attributed to the rise. These entities actively seek alpha by leveraging such sources' concealed predictive potential.

The alternative data management market has been segmented into hedge fund operators, investment institutions, retail companies, and others based on end-user. The retail companies’ end-user segment is expected to dominate the global market, and it is projected to reach USD 10,339 million by 2030, registering a CAGR of 68% during the forecast period. 

Retail organizations use alternative data like sentiment data, social media, satellite, and geolocation, to make strategic decisions, driving the rise. Retailers such as Target, Gap, Walmart, and others, for example, make extensive use of geolocation data. It assists major retail businesses and malls in correlating foot traffic with sales figures in a scenario where internet shopping is quickly gaining market share.

Impact of covid-19

Fundamental investment managers were turning to alternative data in quest of new indications and streams of alpha for picking equities in the COVID economy. Behavioral changes prompted by the global pandemic had encouraged both buy-side and sell-side companies to inquire about alternative data. Several long/short hedge funds used non-traditional data to estimate the impact of shutoffs on businesses like restaurants, cruise lines, airlines, and hotels when the COVID-19 pandemic broke out in March.

Quantitative asset managers have been mining alternative data sets for a while, but in recent years, the profusion of data and analytic tools has entered the mainstream. Researchers and financial advisers used foot traffic from geolocation data to analyze retail sales and supply disruptions as everyone sought up-to-the-minute data. However, the pandemic necessitated the collection of new sorts of data. 

Data from a mobile mapping app, subway turnstiles, and airline security checks were used to determine whether activity decreased or increased during the outbreak and whether a rise in cases would prevent economies from recovering. Thus, the COVID-19 pandemic amplified the demand for alternative data with positive market growth.

Market Recovery Timeline and its Challenges

The post-pandemic period will be crucial for the global alternative data management market. The market's growth is likely to be hampered due to a lack of awareness about alternative data's benefits and skilled professionals working with advanced technologies. On the other hand, factors like the rising demand for alternative data from investment management corporations and the increasing adoption of the 5G network with favorable government initiatives will likely continue to drive the market growth over the forecast period.

Recent Developments

• January 2020- The Earnest Research Company, a data analytics firm based in the United States, has bought Alpha Hat Inc. for an unknown sum. The Earnest Research Company would be able to showcase the insights of new information products of the most outstanding quality and accuracy resulting from the purchase.
• December 2018- Quandl, Inc., a renowned source of alternative and core financial data, has been bought by Nasdaq. More than 30,000 active monthly customers use Quandl to get alternative and core financial data from over 350 sources. Quandl will be merged with Nasdaq's current Analytics Hub company under Global Information Services.