Q&A: Barry Star, Wall Street Horizon
Barry Star, CEO of Wall Street Horizon, a provider of corporate event data to hedge funds, discusses developments in alternative data and how hedge funds are using it.
AW: Barry, alternative data isn’t new – your firm started in 2003 – but it has only become a zeitgeist market in the past few years. Tell us about how the conversations between hedge funds and alternative data providers like Wall Street Horizon have evolved from the early days to now.
BLS: Today, investors are looking at everything that has the potential to help them make more educated decisions about their trades. Alternative data is now creating a lot of the buzz around alpha-generating opportunities for hedge funds. The main appeal is the potential to offer information and insight that other market participants don’t have access to.
At Wall Street Horizon, we don’t get caught up in how our firm is categorised such as an ‘alternative data provider’. The bottom line is we provide accurate corporate event data on over 40 different event types, including changes to corporate events such as earnings date revisions.
AW: What are some mistakes that hedge funds make when it comes to screening – and then buying – alternative data sets and how can these mistakes be minimised?
BLS: It’s not enough to just have access to alternative data sets, but it’s crucial to have access to clean, accurate data that can be acted upon. We recently conducted a survey of more than 100 institutional market participants, and more than one third reported they have lost money as a result of bad corporate event data. This reaffirms the importance of having access to extremely accurate and timely information. If you are trading today with less than extremely clean data, particularly in a world with quants and computerised trading, you are going to run into problems.
AW: Wall Street Horizon sells, amongst other things, ‘corporate body language’ data. What is that and how can hedge funds are use it to generate alpha?
BLS: We all know what body language is; it is the use of non-verbal forms of communication with our posture, gestures and facial expressions.
The concept applies to financial services as well. For example, as a corporate event data provider, we deliver calendars of events such as earnings calls, dividend dates, investor conferences, etc., to institutional clients. Furthermore, we are one of the only firms to provide clients with event revisions, so our data can alert clients when the date of a corporate event changes.
Why is this important? This is where it ties back to corporate body language. If a company moves the date of their earnings call, that movement can give traders insight into a company’s financial health. Academic research has shown that when a company moves a date forward from the expected earnings announcement date they tend to beat expectations and when a company moves a date back they tend to miss expectations. By tracking this information, institutional investors and traders can uncover unique sources of alpha or mitigate associated risk.
AW: Investor due diligence continually evolves, and now includes reviewing suppliers of all types and the hedge fund’s reliance on these suppliers. Are you seeing an increase in the volume of requests from your hedge fund clients for information that they need for potential investors?
BLS: Absolutely. Due to the new regulations recently introduced, many clients have become much more cognizant of the concept of “Data Provenance”. Because we only collect 100% publicly available, primary sourced data and because we collect and rigorously clean almost all the data ourselves, we can easily provide the reps and warranties required by asset managers worldwide.
AW: Finally, the SBAI recently published a standardised data license trial agreement for investment managers and vendors. Whilst not all funds and vendors will adopt this, it’s indicative of a maturing industry. How else do you see the alternative data industry evolving in the next 12-18 months?
BLS: The hottest job in the industry these days is that of the Data Scientist. Many firms are hiring data scientists and this trend will continue as data continues to explode. It’s something clients are looking for as they try to make sense of the vast amount of data available. A big key is how to make the data scientist’s job more efficient and more effective. We believe the way to accomplish this is to have cleaner data and better tools to manipulate the information. To collect big amounts of data and do nothing with it is useless. You have to turn that information into knowledge and wisdom, and it’s not always so easy to do that.
Barry Star is CEO of Wall Street Horizon
© The Sortino Group Ltd
All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or scanning or otherwise, except under the terms of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency or other Reprographic Rights Organisation, without the written permission of the publisher. For more information about reprints from AlphaWeek, click here.