Alternative Data Brings Different Problems - Global Regulatory Outlook 2018

Big data's becoming a big issue for hedge funds and other managers, and it could cause some major problems for compliance.

The case for alternative (or big) data, analytics and artificial intelligence (AI) for investment decisions is increasingly compelling. Even some large managers who have been sceptical in the past are now revisiting the possibilities.¹

It's not without its challenges, however. In November, a report by the Financial Stability Board (FSB) warned that AI could bring new systemic risks. Applications could result "in new and unexpected forms of interconnectedness between financial markets and institutions," it said, and also stated that "widespread use of opaque models may result in unintended consequences."²