BMLL Tech survey shows majority of buy-side seeking level 3 data for analytics

Data and analytics play an increasingly important role in the workflows of all capital market participants to uncover hidden patterns in the data that can be used to predict future market moves. However, utilizing vast data sets for alpha generation is both labor and capital intensive as most firms lack in-house resources to manipulate large data sets and face prohibitive cost of acquiring and analyzing the data.

The next 12-18 months will be critical for all firms looking to embrace data and analytics to help drive increased risk-adjusted returns and should come as no surprise that many investment firms are looking to partner with third parties to outsource data and analytics generation.

BMLL Tech surveyed 100 heads of Data, chief data officers, and data scientists to find out how buy-side participants use predictive data and analytics in their daily trading decisions, to improve alpha generation and mitigate risk. Our typical respondent was a quantitative hedge fund with between $10 and 50 billion in AUM and between 25 and 75% of AUM managed quantitatively focused on long-only Equity & Futures.

The survey found that:

  • High quality data has become a commonly utilized commodity by most market quantitative participants – 74% of respondents say they use Level 3 data in their research program
  • Of the respondents not using Level 3 data in their research programs – nearly 75% said the main reason was its inaccessibility with existing vendors not providing the level of data
  • 64% of respondents said that at least 50% of their investment in new data and analytics capabilities will be from buying-in these capabilities
  • 41% of respondents saying that they will increase their budget allocations significantly for third-party data as a key element of their quantitative research
  • Over 80% of respondents said they already do, or are very likely to, embrace cloud for their data and analytics generation and processing over the next 12 – 18 months

Read the full survey

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