There has been explosive growth in the types and quantity of data available to the fund management industry in recent years, and as the demand for data has increased so too has the cost of accessing or purchasing such data. Data can be purchased from vendors (such as data relating to credit card transactions, social media usage, geolocation and satellite observation) or collected by a fund manager itself (such as by web-scraping).
As the industry has become increasingly crowded and pressure on fees has grown, many fund managers have sought to distinguish themselves and their performance from their peers through the use of big data in their research process.
Whilst the industry has been fast to harness the potential of this data, less attention has been paid to the threat of regulation. Many perceive regulators to be solely concerned with data breaches and the use and misuse of data by the tech industry (in particular, the use of data by social media companies).
However, as reported by Financial News, we expect scrutiny by the regulators of the fund management industry’s use of data to increase in the future, particularly as regards to privacy and insider dealing. We will continue to monitor the situation and update our clients with significant developments.
So far, regulators have taken little action to stop investors from accessing alternative data, even when it comes from the credit cards and cellphones of consumers. But they may not stay silent for long.