In the ongoing search for alpha, the more adventurous financial firms have in recent years sought out various forms of information that fall outside the traditional realm of market data, which many say has become commoditized. These new types of information include sentiment data derived from positive or negative news stories, or postings on social media, logistical and operational data, and even sensor-based data and satellite imagery.
One area that has gained popularity over recent years is socially responsible investing, powered by ESG (environmental, social and governance) data and indexes. In this space, TruValue Labs last week announced that it has begun making a version of its Insight360 analytics platform available via Thomson Reuters’ App Studio, aimed at buy-side firms wanting more ESG data in Thomson Reuters’ Eikon desktop.
Meanwhile, Southland Capital Management is rolling out a subscription-based version of its analysis and commentary, which provides alternative insights on underperforming loans and their impact on Business Development Companies. The firm had provided its analysis for some years, but recently realized it could provide a better indicator of performance, and enlisted Boston-based bond data provider Advantage Data to save the effort of collecting and maintaining data from 10K filings every quarter.
And the hunger for alternative data types isn’t slowing down, though Tammer Kamel, chief executive of financial and economic search engine Quandl—which is embarking on an effort to increase its coverage of alternative and hitherto-unmonetized datasets—says that some of these new datasets are already showing signs of becoming commoditized, and that firms are now demanding more operational metrics such as job applications, electronic receipts, receivables, permits and bills of lading. Being able to deliver this will keep Quandl ahead of the trends in demand, Kamel says.
The biggest news this week was when the UK chose the “alternative” route to what most expected in its “Brexit” referendum on whether to leave or remain in the European Union. The decision to leave has plunged UK and European politics and global financial markets into turmoil, with the pound dropping some 12 percent overnight on the news. Financial firms and bookmakers alike had banked on the UK remaining, while regulators and financial industry authorities had spent prior weeks working on contingency plans in the event of a “leave” vote, and say Friday morning that they are carefully monitoring the situation, and will make liquidity available if needed.
The question is what role Britain will play in the European markets from outside the European Union. Will it face continued hardship without the strength of the EU around it, or, after the initial (and hopefully only short-term) volatility, will it become a safe haven much the same way that money flooded into the Swiss franc overnight as the value of pounds sterling fell? Certainly many things will remain unchanged: The London Stock Exchange and Deutsche Börse say the move will not change their merger plans. Issues such as the membership and active participation of UK firms in European exchanges and trading venues, and many of the regulations that govern the financial markets are also unlikely to change. UK regulator the Financial Conduct Authority noted in a statement Friday morning that much of the UK’s financial regulation derives from European regulations, and will remain in place until the government makes any changes. And certainly, any firm actively trading with European counterparts will probably need—or want—to hold themselves to the same standards of regulation for compliance purposes.
After all, the Brexit was a vote for a political disentanglement, not a vote to disconnect from the markets. And though some are predicting dire consequences, there are always alternatives, especially if all involved continue a spirit of collaboration—albeit outside of the formal framework of the EU.
Bill Murphy, CTO of Blackstone, once again joins the podcast to discuss the private equity firm's new offices, designed to house its innovations team.Subscribe to Weekly Wrap emails