The usefulness of alternative data as an input for investment decision-making comes from its ability to capture new price-moving information, which provides an information edge to asset managers. However, a question that is occupying the minds of data users and providers is what is the monetary value of an alternative dataset?
Assigning a monetary value for alternative data is important because information about how valuable it is for investors allows data providers to optimize their pricing schemes and increase revenues. The value of alternative data for consumers lies in its monetizing potential and the insights it provides for increasing their returns. Furthermore, the value of alternative data depends on the investor's profile and the fund's size. The size of a fund also plays an important role. A seemingly expensive dataset might generate multiples of its cost in additional profits for a large enough fund, but possibly not for a smaller fund.
The value of alternative data also depends on how it will be used. Finally, the value of alternative data is not an absolute number. It is always relative to a specific benchmark, for instance, the one currently employed by the fund, which does not use alternative data.
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