Innovation continuously evolves. As I looked into understanding the recent news that Quantopian partnered with FactSet, I asked myself all sorts of questions. My first reaction was, “Weird collaboration, seems at a first glance like sleeping with the enemy”. FactSet has always been in the business of selling data and Quantopian has always been in the business of crowdsourcing alpha generating algorithms (market neutral). As I have covered them already twice by now (Spring 2015 and Spring 2017), they have designed an environment for their growing global user base (close to 200 countries and nearly 200,000 users) for backtesting, researching and getting rewarded for their algorithms. Data has been mostly free and continuously being enriched. Starting with a decade of historical data from Morningstar Corporate Fundamentals, over 70 US futures data, and all major US exchanges. They also provide access to some premium data sets that are still free for historical data (excluding recent 1-2yr data). This is where Quantopian started building bridges with the Alternative data world. Here is a small sample of such data that can be used for free in the aforementioned restricted form and only on the Quantopian platform, or downloadable via API and up-to-date, through monthly subscriptions.
- Estimize – Crowd-sourced earnings estimates. Nearly 70% more accurate than Wall Street. $35/per month.
- Issue Equity from EventVestor – Dataset of events and announcements covering secondary equity issues by companies. $50/per month.
- Sentdex Sentiment Analysis from Sentdex – Sentiment of companies from sources such as Wall Street Journal, CNBC, Forbes, Business Insider, and Yahoo Finance. $10/per month.
- Alpha Vertex – Their PreCog 500 predictive machine learning to forecast 5 day stock returns. $135/per month.
- PsychSignal from StockTwits – real-time Trader Mood and data. Free.
- Zacks – Broker Ratings Revision History. A history of sell-side analyst recommendations and ratings. $15/per month.
There is also an all-in-one package for $350/per month that gives access to all subscription packages.
These scattered bridges with real-time and alternative data sets has been growing and empowering Quantopian users. Quantopian is by no means, an alternative data marketplace, but it is partnering with The Open:FactSet Marketplace which is a new initiative from one of the large incumbents in the Financial data market – FactSet (NYSE:FDS)
This marketplace offers access to a rich variety of harmonized 3rd party data in addition to FactSet’s data feeds. Easy = access, harmonized = smart data, rich marketplace = discovery, testing, research!
Quantopian has launched the so-called Quantopian Enterprise service which offers their users pre-integrated premium financial data sourced and cleaned by FactSet!
FactSet will sell subscriptions to Quantopian’s software to its 5,000 corporate clients in the investment financial subsector that can use Quantopian algorithms to enrich their quantities strategies and or adapt them. The Quantopian Enterprise solution will be essentially a software as a service platform that will have the standard extra security that corporates are used to. Quantopian users will continue to have free access to historical FactSet data.
At 35,000 feet, this partnership is a solid example of where the market is heading. It is difficult to scale a business that sells alpha generating algorithms to investment professionals. The main reasons, are that no algorithm is bullet proof over time and needs adapting; no investment professional wants to trade on an algorithm that is used by others players. So, Quantopian’s business is addressing these issues by creating an environment to build and improve a variety of algorithms – Adaptability combined with variety. In quant words, dynamic diversification of algo strategies.
The FactSet partnership, takes this to the next level by providing real-time and rich, alternative, harmonized, 3rd party data to make the dynamic improvements of the algorithms more robust and since it is a SaaS business model, each investment professional makes their own customized adaptation in their own privacy. Two birds with one stone. FactSet has close to 90,000 corporate clients!
This partnership can be another way that Fintech empowers the buy side. This is a topic that I have also analyzed in my contribution to the crowdsourced WealthTech book , by J. Wiley “Empowering Asset Owners and the Buy Side” by Efi Pylarinou in Chapter 9: What is the Future of WealthTech.
Efi Pylarinou is a Fintech thought-leader, consultant and investor.
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