Eighty per cent of asset managers are planning to increase their investments in big data in 2017, S&P research shows.
The report, Big data in asset management, finds 19 per cent expect to boost investments in the area by more than a fifth, while a further 63 per cent will increase investments by a smaller amount.
Eighty two per cent consider big data investments somewhat or very important, while only 6 per cent of asset managers argue it is not important.
In the area of alpha generation, big data will be particularly useful to asset managers investing in the financial and consumer sectors, where there is a larger availability of rich data sources, Crisil Global Research & Analytics argues.
Three quarters of asset managers say alpha generation would be their primary objective in investing in data analytics followed by 25 per cent who say client and distribution insights would be the primary objective.
Providing insights for sales teams and improving risk management were ranked of less importance.
Crisil notes third-party firms such as Four Square, Placemeter, Earnest and Second Measure collect location, footfall and credit card transactions data that could be exploited by asset managers.
It points out that Twitter analytics firm Dataminr revealed preliminary reports of Volkswagen’s emissions scandal three days before the market reacted.
One data provider, CargoMetrics, which uses satellite images and shipping data to provide information on global trade, has even entered the investment management business itself by launching a hedge fund.
The report forecasts increased demand for smart beta funds that utilise big data for a competitive edge and argues that it will lead to new factors beyond traditional ones, such as value, momentum and size.
Refining investment models was listed as a priority in big data analytics for 69 per cent of asset managers, while 56 per cent want to leverage alternative data, half seek to analyse sentiment and customer analytics and 38 per cent want it for natural language processing.
The adoption of big data will result in increasing collaboration between asset managers and tech firms, universities and external consultants.