A fierce battle is underway for better returns, reduced risk and faster entries. It is Alternative Data that gives traders and funds the biggest advantage today, not AI. The time of AI dominance is yet to come.
Alternative Data is a revolution in trading today more important than the Artificial Intelligence revolution. They are able to improve virtually every part of a fund’s investment activity: improve signals or systems, reduce risk, show situational context when trading a position.
The system hasn’t stopped working, but there’s no liquidity like there used to be, entries cause stronger counter moves because… the biggest ones have already been there and exhausted the liquidity. The biggest funds use alternative data to enter faster.
Better pre-trade analysis improves performance. Better post-trade analysis improves understanding of the factors that make up good performance. Until now, such deep insights into the market and the environment have been impossible.
From a strategy perspective, funds have no choice today and (sooner rather than later) dealing with alternative data will be a necessity. From an operational strategy point of view – it is important today to create in the fund the competence to use alternative data, because this revolution is just beginning.
Alternative data gives a big market advantage. Today, in addition to AI tools, they are a major driver of building competitive advantage. However, what they bring to some they take away from others. That means systems stop working, signals become less profitable, pressure on discretionary traders and portfolio managers increases. AD are changing markets without a doubt.
In a recent article in New City Trader I show more broadly, with specific examples, how they are doing this ⇓