Data Monetisation

Selling data to investment managers – What you need to know

There are many ways to monetise your data and there are many factors that you should consider when exploring this emerging industry.

Jul 27, 2022

Selling data to investment managers – What you need to know

Are you looking to sell your alternative data to hedge funds, private equity firms, venture capital firms, investment managers and corporations?

There are many ways to monetise your data and there are many factors that you should consider when exploring this emerging industry. At first, the alternative data market can appear overwhelming but at Neudata, we specialise in helping alternative data vendors by introducing them to relevant data buyers that are interested in unique sources of alternative data.

Because we sit in between alternative data buyers and data sellers, we’re in a unique position to help you sell your alternative data and provide market intelligence about your product.

Sign up for a free data listing today and a
member of our team will be in touch to discuss your data goals.

What types of alternative data are most popular among buyers?

The most commonly sourced datasets are:

  • Web-scraped/web-crawling data
  • Transactional data
  • Web- and app-tracking data
  • News and event data
  • Economic data

Within those categories, some of the datasets that are in highest demand from data scouting professionals include employment-related data, EU transactional data and company-derived sentiment data. When monetising your data, you must understand who is buying your data and, most importantly, the exact benefits that your data offers.

Investors are most concerned about alpha-generating data, which means that your data will give them some additional information that they can use within their investment process. Data that generates alpha offers data buyers an actual return on investment, which makes the procurement process easier.

Which types of funds are most interested in my alternative data?

Hedge funds that care about alpha-generating data typically fall into two categories — quantitative investors and fundamental investors.

1/ Quantitative hedge fund investors, or quants, were the early innovators in the alternative data industry. Also known as systematic funds, these investors use data to power complex computer algorithms that identify trading opportunities within the market.

The data scouts at these funds are constantly looking for new, high-quality data sources to feed their trading algorithms and improve their portfolio returns.

2/ Hedge funds that use fundamental analysis, as well as more traditional asset managers, have begun using alternative data to make better investing decisions as well. These investors typically use alternative data to supplement the research process and to enhance their risk management process.

What challenges should I be aware of when selling alternative data?

The alternative data space is a highly regulated industry for investment managers. All investment managers are required to be licensed by regulation authorities. As a result, data providers are often hit with a lengthy due diligence process that can take longer than the data evaluation process itself.

The due diligence process first begins with an NDA (non-disclosure agreement) and then a DDQ (due diligence questionnaire) that is produced according to industry standards. One of these options is Neudata’s DDQ — a modern, intuitive approach to due diligencing — which is available as part of the Sentry module on our Neudata Scout platform. Buyers may then perform complete company background and permanency risk checks, as well as a data provenance check, which is fundamental to legal compliance efforts.

Alternative data regulations are rapidly developing. New laws are being created worldwide every day, so data providers’ policies and procedures must be flexible and easily adaptable.

How much is my alternative data worth?

Once you’ve sourced your data, structured it and ensured its legally compliant, the final stage is pricing it.

The investment management data buyer market is constantly seeking out new datasets; however, that data must be able to aid investment decisions and add value through expected improvement to their portfolios. There are numerous factors that have the potential to influence future dataset prices, but the most important factors to consider are the uniqueness, relative scarcity and investment idea-generating potential of your data.

Different investors will (naturally) invest differently. As a rough rule of thumb, data providers should benchmark the price of their datasets against other similar datasets. Many data vendors will also choose to roll out different types of pricing structures that can be rolled out to suit individual client needs. For example, many data providers choose to offer different regional or sector-specific subsets of their data for a lower price than the full version.

How do I market my alternative dataset to hedge funds and other investors?

Marketing your data in order to sell it requires a perfect sales pitch and a deep understanding of the investment management universe.

One top tip is to know your customer/their business and to understand why they would benefit from purchasing your dataset. By demonstrating a deep understanding of the data product, you build trust with your potential clients and establish a position of expertise, especially if you can explain how your data can help them generate alpha.

Throughout the entire process, ensure that you are transparent about the source(s) of your data, show that you can clearly explain your data capture methodology, and make sure you are honest about any limitations, weaknesses, biases and gaps within your data product.

Where can I find alternative data buyers?

Discovering buy-side clients and shepherding them through the data discovery and trial process can be an overwhelming task. However, many resources exist for data vendors that are looking to gain new data buyer clients.

One strategy is to attend industry events, like Neudata’s Data Summits and our AltDating networking programme. Through these events, data sellers can partake in personalised one-to-one matchmaking that allows you to meet data buyers that are actively interested in buying the data that you sell.

Meeting clients through physical and virtual events is a great way for new-to-market data providers to capture buyers’ interest, but it’s also an opportunity for experienced data vendors to meet newer data buyers.

Ready to get started?

Monetising your data is easier than it seems. Buyers are always looking for new datasets and as the alternative data industry continues to evolve, your data has never been more valuable.

Neudata Provider is a platform specifically designed to help nearly 2,000 alternative and traditional data vendors sell their data and to do so as seamlessly as possible. Since 2016, Neudata has been the only provider of data scouting services that does not require vendors to pay a commission or enter into a revenue-sharing agreement in order to list their data.

Sign up for a free data listing today and a member of our team will be in touch to discuss your data goals.

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