The wonky datasets powering multi-strategy funds and quant giants aren't going anywhere.
The alternative data industry, made up of firms selling data collected from cell phone geolocation, credit card receipts, satellite images, and more, is growing steadily, and 2025 is expected to be a strong year for sales, according to a new report from industry consultancy Neudata. Hedge funds and other investors rely on these players to feed them information that gives them a more detailed look at specific companies and sectors or slices of the economy as a whole.
Nearly all buyers (95%) — including hedge funds, venture capital managers, and consultants — surveyed by research firm Neudata expect their 2025 budget to grow or remain the same. Meanwhile, more than 70% of sellers saw a jump in sales this year and expect continued growth next year.
"The mood among alternative data buyers and sellers is one of confidence," the report reads in a section about the expected "budget boom."
And this boom might hurt hedge funds' wallets. Alternative datasets have become increasingly viewed as table stakes, shifting from "nice to have" to "need to have" internally.
Of the 60 buyers surveyed, the average number of vendors they work with was 20, while the average alt data spend in a year is $1.6 million — roughly $80,000 per dataset. But for the biggest funds — the multi-strategy giants who have come to rule the hedge fund game — more than $5 million a year is shelled out on 43 data vendors, on average.
While price points can frustrate investment managers, especially as LPs become more focused on expenses, once funds find providers they like, they're remarkably loyal — and vendors know this. Integrating a new data feed into a fund's systems can be challenging, especially for sophisticated quant funds, and so it takes a lot for a manager to be willing to make a change.
"Most data buyers continued at least 90% of their subscriptions during the past year, indicating that once datasets are purchased, buyers are loyal to their decisions," Neudata's report states.
This stickiness is part of what allows places like MScience, the longtime data vendor owned by Jefferies, to unbundle their products and raise prices for many clients — and still retain a vast majority.
Buyers' loyalty also makes it tough for newcomers to break through.
"Most funds end up subscribing to less than a quarter of the datasets they trial," the Neudata report states, with 17% of buyers stating that they didn't buy any of the data they trialed over the past 12 months.
There's also a surge of interest in using alternative data backlogs to train AI models, giving long-running alternative data vendors another leg up in negotiations.
"Overall, the results of The Future of Alternative Data survey indicate a varied buyer market," Neudata wrote.
"Both buyer and provider responses indicate a growing industry, with forecasted increases in spending and revenue."
