Hedge funds plan to spend even more on other data

Almost all buyers (95%) – including hedge funds, venture capital managers and consultants – surveyed by research firm Neudata expect their 2025 budget to increase or remain the same. Meanwhile, more than 70 percent of sellers have seen an increase in sales this year and expect continued growth next year.

“The mood among buyers and sellers of alternative data is one of confidence,” the report said in a section on the expected “budget boom.”

And this boom could hurt hedge fund wallets. Alternative datasets have increasingly become seen as table stakes, moving from “nice to have” to “must have” indoors.

Of the 60 buyers surveyed, the average number of vendors they work with was 20, while the average spend on alternative data in a year is $1.6 million—about $80,000 per data set. But for the biggest funds — the multi-strategy giants that have come to rule the hedge fund game — more than $5 million a year is paid on average to 43 data providers.

While price points can frustrate investment managers, especially as LPs become more expense-focused, once funds find vendors they like, they’re remarkably loyal—and sellers know it. Integrating a new data stream into a fund’s systems can be challenging, especially for sophisticated quantitative funds, and therefore it takes a lot for a manager to be willing to make a change.

“The majority of data buyers continued at least 90% of their subscriptions in the past year, indicating that once data sets are purchased, buyers are loyal to their decisions,” the Neudata report said.

That rigidity is part of what allows places like MScience, the longtime data provider owned by Jefferies, to unbundle its products and raise prices for many customers — and still keep the vast majority.

Also, the loyalty of buyers makes it difficult for newcomers to pass.

“Most funds end up subscribing to less than a quarter of the data sets they test,” the Neudata report said, with 17% of buyers saying they hadn’t bought any of the data they tested in the past 12 Monday.

There is also increasing interest in using alternative data backlogs to train AI models, giving long-standing alternative data providers another bargaining chip.

“Overall, The Future of Alternative Data survey results indicate a diverse buyer market,” Neudata wrote.

“Both buyer and supplier responses indicate a growing industry with forecasted increases in spending and revenue.”