What is the Use of Alternative Data in Investment Banking?

Banking CIO Outlook | Friday, November 29, 2019

With alternative data models assuming importance, investment banking firms can uncover many new business opportunities.

FREMONT, CA: Alternative data is of tremendous value to investment banking firms.  Alternative data helps broaden the success prospects and enhances ROI rates for the private equity firms by helping discover critical insights.

For investment banks, long term investments are essential, as most of the firms do not trade in the short term as public traders do. Thus, alternative data models for investment banking firms have to be different from the ones used conventionally by other financial institutions. Investment banks can make the most of customized alternative data models that take into consideration various factors that have long-term financial impacts

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A report has claimed that around 27 percent of investment bank experts are utilizing alternative data. From an investment banker's perspective, alternative data could include several financial and non-financial datasets that are relevant to companies. It could consist of information like- how a company pays its bills, foot traffic, and credit card receipts. Such data can facilitate investment banking firms to make decisions regarding investments. 

 Further, alternative data can empower firms to recognize novel possibilities, manage their portfolios better, and ascertain the state of things in the industry. The other role of alternative data is to enable investment banks to maintain the existing portfolio. For example, private firms can verify if the investment in a business in a particular sector is expanding or narrowing.

Thus, alternative data adds a lot of value to make investment decisions better. 

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