The world's largest publicly traded hedge-fund manager has started using the public cloud to help it better navigate and assess the explosion of alternative-data feeds.
The $140 billion investment firm Man Group remains largely reliant on its private cloud, despite much of the buy-side wading deeper into the public sphere. But a wealth of new, alternative-data sources hosted on public-cloud networks is pushing Man Group to open up to the tech via its 18-person data-science team that launched in January 2020.
Man Group is using Amazon Web Services to streamline how it reviews and prepares alt data before it is ready to be implemented into an investment strategy.
"What we're looking for is speed and access to third-party data to validate quite quickly," Hinesh Kalian, Man Group's director of data science, told Insider.
Kalian, who has built a career in data acquisition, management, and strategy within Man Group's quantitative investing arm, is seeing new data providers flood the market. He estimates there are some 7,000 new alt-data providers in the marketplace today. Roughly 80% of them host their data on the public cloud.
But the new providers don't have long-standing relationships with financial firms like traditional players.
The public cloud serves as a buffer for Man Group to work with the data without having to commit to bringing it in in-house.
"That's where public cloud would provide direct and quick access to third-party data, and you have the ability to utilize some analytics to quickly screen and assess vendors before thinking about bringing them into a Man Group ecosystem," Kalian said.
Working with upstart data players
To Man Group, alternative-data sources provide different vantage points of seeing the market. For instance, when investing in certain markets like China, established global sources of data, like Google or Twitter, won't always illustrate a fleshed out picture.
"It's becoming more apparent that traditional data sources typically cannot provide real-time insights into financial and economic health. We are not looking to tackle a specific problem, but rather we are creating solutions to build a data mosaic leveraging a variety of alternative data pieces," Kalian previously told Insider.
Recently, the market for alternative data has started to mature. In January, Bloomberg paid more than $100 million for Second Measure, a company that analyzes credit-card data. Similarweb, an alt-data firm that tracks website usage, went public this May at a $1.6 billion valuation.
But the space still has a ways to go.
"What's quite important, especially if you look at the data science side, is that a lot of the new providers coming into the market are not as established as your typical market-data providers like Bloomberg and Refinitiv," Kalian said.
Vetting each provider to the point where Man Group could bring it in-house would limit just how many new datasets it could work with.
New sources of alternative information also come with potential issues, like holes and biases within data sets, Kalian added. Rather than immediately bringing alt data on-premises, Man has chosen to initially work with the data on the public cloud.
That calculus brought Man Group to Amazon Web Services, a decision largely driven by the data it hosts, Kalian said.
The use of public cloud is isolated to the research phase, which includes processes like accessing the raw data, performing data-quality checks, and structuring it in a standardized form that is compatible with the rest of the firm.
Looking forward, the firm doesn't want to tie into one provider and would like to move to a multi-cloud approach "to gain access to providers, which may be hosting the data on Google or even Snowflake at times," Kalian added.
Private cloud still reigns supreme within the front office
Man Group's data-science efforts don't solely exist on the public cloud. At a certain point in the firm's investment workflow, the data is kicked back to its private cloud.
Analytics, data modelling, and back-testing (or evaluating the efficacy of the given model) are all conducted on-premise.
That's because the firm's private cloud, which has grown since its 2007 inception, outpaces what's available through public-cloud providers, Gary Collier, head of Man Alpha Technology, which oversees tech used by investment managers, told Insider.
"Almost all" of Man Group's front office technology is built within the private cloud, Collier said.
The hardware and the networking speeds on the hedge fund's private cloud make for faster results. Also, the cost of buying a server, which can often last multiple years, is roughly equivalent to renting one from a third-party for a year.
"We've not really found anything that we could just go and buy or build in a public cloud provider that would give the same level of quality," said Collier.
