Few professions have higher stakes than those in the Hedge Fund industry. One investment decision can have multi-million-dollar consequences and one mistake can be fatal to an analyst’s career. Similar to a marathon runner who trips and falls mid-race to the gasps of spectators, big trading mistakes are visible and quantifiable and can erode the trust and future earning potential of even the most promising analyst.

 

There are multiple anecdotes of how trades betting on Alternative Data trends have gone south and they tend to make strong and lasting impressions. Many managers we speak to cite “My buddy got burnt on AltData” as a reason to ignore this potential source of Alpha.

 

Of course, just like the top athletes can recover and win after a fall, top managers tend to regroup, analyze their process, and improve after an unfavorable trade based on data. They know that giving up will leave a lot of Alpha on the table in the long run and a process can be improved to avoid similar mistakes in the future. When they do a retrospective, they often find that data itself was not the sole reason they were on the wrong side of a trade. Often, the issue is in the process, not the data itself. An error may be due to faulty analysis, tagging, or simply a mismatch between your understanding of the market’s expectations and reality.

 

If you know of an investor who has been burnt by placing their trust in data, don’t let that stop you from improving your own process, even if you tread cautiously at first.

 

Often, it helps to have a partner by your side. We have helped dozens of managers not only improve their investment results with Alternative Data but also grow the trust and confidence required to overcome the inevitable hiccups.

 

If this resonates, please reach out. We would love to hear from you.