Location, location, location.
That's not just a catchphrase in real estate, it's data some active fundamental money managers are using to help determine whether to buy or sell securities.
And the information, called location-based data, is supplementing traditional sell-side analysis of securities — something not lost on money managers in the era of research cost concerns surrounding MiFID II, sources said.
"It's a new wave, a new way of doing fundamental investing," said Michael Recce, chief data scientist, Neuberger Berman Group LLC, New York. "This data provides a higher-resolution microscope to see things and make them more visible. There's an advantage to seeing this information earlier and in more detail."
Added Mark Ainsworth, head of data insights at Schroder Investment Management, London: "We make extensive use of location-based data in active fund management, both in equities and fixed income. Analysts and fund managers look at our data reports to assist them in management decisions. Our role is boiling down key points to make the information not too big or too complex."
With location-based data, the anonymous tracking of smartphones based on global positioning satellites and cell towers, as well as information gathered from satellite photos, provides not only information on the number of people at retailers, but also how many are working in factories and at what times of day. Data scientists then narrow the information to specific companies to determine information on things like same-store sales estimates in nearly real time — as opposed to at the end of a month or quarter — or whether manufacturers are increasing production before a business expansion is announced.
According to a report released April 27 by Opimas, a Boston-based capital markets consultant, the market for mobile device location data in the money management industry is expected to grow 40% annually to $250 million by 2020. That includes spending on data sources, predictive analytics, infrastructure and related data management, according to the report, "Generating Alpha with Mobile Device Geolo- cation Data."
"In one hour, we have data on about 500 million phones worldwide," said Greg Skibiski, founder and CEO of Thasos Group, New York. The firm takes the real-time location data, analyzes it and then sells that information to clients that include money managers. Mr. Skibiski said no personal information is gathered.
"Nobody wants raw data," Mr. Skibiski said. "They want data that's easily understood … We're one piece of the puzzle that people use to confirm whether to invest or to understand the risk of an investment. If a business metric is turning down, managers and traders can take some action. Location data help the buy side fill in the missing pieces in their research. Location data is special because it's a completely independent source of information that can supplement other data sets," like credit-card transactions, he said.
Hedge funds and managers of real estate investment trusts have used Thasos data for short-selling and mall traffic measurement, respectively, for several years, Mr. Skibiski said.