alternatives

5 questions on our new DataEdge alternatives strategy

5 questions on our new DataEdge alternatives strategy
Laurent Joué  - Head of Systematic Alternatives and Lead Portfolio Manager

Laurent Joué

Head of Systematic Alternatives and Lead Portfolio Manager
Marc Pellaud, PhD - Lead Portfolio Manager

Marc Pellaud, PhD

Lead Portfolio Manager

In this Q&A, Laurent Joué and Marc Pellaud, Co-Leads of the LOIM DataEdge alternatives strategy, explore how actionable insights from big data can help better predict company earnings. How do alternative data sets improve our understanding of consumer behaviour and its impact on company results in order to uncover alpha opportunities?

 

Need to know:

  • Our DataEdge alternatives strategy uses big data to identify trends in consumer behaviour in real time. Such data can be used to improve the forecasts of company earnings
  • Within the DataEdge investment universe, our research has found that earnings surprises and equity returns are tightly connected – both on the upside and downside – and can generate alpha opportunities
  • LOIM’s investment approach combines innovative alternative data research with systematic investment expertise. We then apply this ‘information edge’ to stock selection


1. How does LOIM’s DataEdge strategy use alternative data to improve the forecasting of key company indicators?

The strategy relies on the use, acquisition and analysis of alternative data points across multiple geographies, sectors and sources. These include:

  • credit card transactions
  • digital receipts
  • web traffic
  • activity on apps
  • geolocation services

Thanks to new advances in data science, it is now possible to structure and filter this data to identify consumer behaviour trends in real time. Systematic and quantitative analysis methods are then applied to predict how patterns could impact the key performance indicators (KPI) of listed companies, such as sales, revenues, users, new customers and engagement patterns.

To generate alpha potential, the strategy aims to identify earnings surprises, as well as track inflection points in the trends of KPIs over several quarters.

 

2. What is the strategy’s investment universe?

This alternatives strategy is global and sector neutral. The investment universe is currently US centric, and focuses on consumer, technology, industrial and healthcare companies. In term of market capitalisation, it is predominantly exposed to small and mid-caps.

This universe is shaped by the availability and quality of the alternative data we seek, and is expected to evolve and grow over time. The current1 eligible universe covers 640 companies listed on US markets, and the strategy monitors 200-250 companies day by day. Figures 1 and 2 provide breakdowns of the universe by sector and market cap.

FIG 1. Sectors comprising the DataEdge universe12

To learn more about our DataEdge strategy, please click here.

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