How to Target Your Audience
The first step in any data monetization process is determining if your company even has data that may be valuable to the investment community (i.e. hedge funds, specifically). More often than not, companies are sitting on a ton of insights that relate to their strategic partners, customers, supply chains, competitors, etc. All of this adds color to an investment thesis. Data that is gobbled up by hedge funds may be – transactional/point-of-sale, geolocation, satellite imagery, loyalty/rewards cards insights, email receipt, health care claims, shipment data, etc.
Before we talk about data value, let’s review the different types of hedge fund strategies you need to take into consideration:
Discretionary, Stock-Picking – Fundamental shops (multi-manager, multi-strategy platform funds)
These platform funds are made up of PM teams who share centralized resources and purchase data that is highly correlated with a public company KPI (“Key Performance Indicator”), is unique in nature, and can be back tested. Typically these funds have an internal market intelligence/data sourcing unit made up of professionals who find and onboard data for investment teams based on need.
Long/Short hedge funds also live in this category. They pick stocks, have the largest AUM typically and trade frequently. The appetite and need for data is highest with these types of shops. Long/Short funds want to be right on every trade due to their large positions. The budget for alternative data investment is significant and often, limitless.
Quant, Systematic, Algorithmic – Quantitative Investing shops
The strategy at a quant shop is all based on algorithms and high-frequency trading. These firms are looking for a long history of data that can be backtested, that applies to 1000’s of securities and is published frequently. The data here is typically market data but they have interest in unique alternative datasets as well. Quant funds are a little more difficult to sell data to, they aren’t looking for just anything.
In addition to traditional discretionary or quant funds, there are other types of hedge funds like macro driven shops (want broader, global trends like inflation, weather, interest rates, global events), credit funds (invest in debt), pension funds/sovereign wealth funds (manage money of countries, endowments), or private equity/venture capital (invest in mostly private companies and not publicly traded ones).