Alternative data is no longer a niche tool for hedge funds—it has gone mainstream, with investment managers increasingly relying on geolocation and consumer spending data for insights, according to research.
The study by alternatives platforms Exabel and BattleFin, which surveyed hedge funds and other active investment managers and analysts working for fund management firms, found that 86% plan to increase their use of alternative datasets over the next two years. Demand is highest for geolocation data (51%) and consumer spending data (50%), which are expected to provide a critical edge in decision-making.
Consumer spending data emerged as the most valuable dataset, with 75% of fund managers and analysts citing it as likely to deliver an outsized informational advantage. Other key data sources include Natural Language Processing (50%), social listening (45%), and employment trends (43%), while only 7% see satellite data as highly impactful.
The report found that 98% of investment professionals agree that official data lags behind actual economic activity, making alternative sources increasingly essential. All the managers and analysts questioned in the US, UK, Singapore and Hong Kong currently use alternative data in some form, according to the study.
Fund managers are also becoming more experienced in leveraging these insights, according to the findings. 61% of respondents said they have been using alternative data for three to five years, while nearly one in ten began over five years ago. Only 28% adopted it within the last three years, suggesting that its role in investment research is now well established.
Andreas Aglen, president of Exabel, highlighted the industry’s growing dependence on alternative data: “Institutional investors have embraced alternative data as a key source of differentiated insight, and the demand for it as a crucial component of alpha generation continues to accelerate.”
The shift reflects a broader trend of investment managers seeking new, real-time sources of intelligence to stay competitive, according to the researchers. The majority of respondents (87%) rated their experience using alternative data as good or excellent, reinforcing its value in portfolio decision-making. “It is even clearer now that alternative data has gone mainstream, serving as a vital source of insights to investment managers around the world,” Aglen added.
