Was this email forwarded to you? Sign up here

Everyone thinks that hedge funds have unlimited budgets. I constantly hear about hedge funds spending 7 figures plus on datasets. I think the reality is that most datasets sell for less than $100k per year. There are many that are in the $100k to $250k range and very few if any that are selling to hedge funds for over $1 million dollars.

Do hedge funds have data budgets? For quantitative funds, if it makes you money, and is uncorrelated, the answer is typically there is no budget. That being said it still takes time, effort, and patience to sell to quants.

Do fundamental hedge funds have budgets? Almost all the time they do. Or they may constantly look to do a big purge of unused data and tools. That being said, if the fund does activism, for example, you can’t put a budget on a dataset need. If it helps with a big activist research project or position, throw the budgets out the door.

What about for all other types of funds and strategies? Well, it depends. If a firm is raising money from a new large European investor and they need ESG metrics as part of reporting, well then there is no budget because this is something you must have to meet investor demands.

My rule of thumb for most data vendors is to assume if you are selling a new, unique dataset that has a moat and is used by minimal hedge funds, then there is typically going to be interest and an unlimited budget. If you are selling something that is commoditized, something that is hard to work with i.e. data isn’t cleaned, structured or well documented, or you are doing a displacement sale, then its going to be hard and budgets will be tough.

Are you ready to take your investing game to the next level?

We empower investors like you with a daily newsletter which includes the insights needed to stay informed and make profitable decisions in the stock market.

Join Millions Who Trust The Early Bird