Interview: Toby Dayton, President & CEO, LinkUp

1. What do you think are the biggest challenges facing data scientists/AI experts/quantitative investors after the pandemic and why?

a. There’s more voracity in the data space than ever before so at the most basic level I think the biggest challenges facing data scientists/AI experts/quantitative investors is simply demand. The impacts of, and recovery from, the initial wave of the pandemic really opened everyone’s eyes to the understanding that it’s not sustainable to rely on traditional sources of data so we’re seeing a massive uptick in demand not only of data but also of those who can create compelling narratives and take action with it. Scaling the systems and solutions needed to meet the demand is likely going to be the biggest challenge. That being said, the challenges that existed before still exist today. Cleanup of inaccurate, inflated and diluted data continues to be a problem, and cutting through that pollution continues to be a challenge.

2. The way in which alt data is being sourced and consumed is changing after the pandemic. Why do you think this is and what do you see happening further within the alt data space?

a. I think the biggest change coming out of the pandemic generally is that alternative data has essentially become just data. That was always going to be the case, but the pandemic greatly accelerated its adoption and acceptance into the mainstream. With the incredible impact from Covid on virtually every aspect of our lives and the economy, the unique and powerful aspects of alternative data really came into the spotlight and very quickly came to be broadly recognized as being more timely, more insightful, more versatile, more granular, and more accurate than traditional sources of data. In terms of how data is sourced and consumed, I think the same trend has occurred there as well - the pandemic massively accelerated trends that were already in place and the data space has reacted well to meet the tremendous growth in demand and continue adapting to the expanding market and the way buyers want and need the data to be delivered.

3. The pandemic has brought about changes in the operating models of hedge funds, perhaps moving to a hybrid version of working in the future. How could this operational shift affect the digital infrastructure of a fund?

a. It’s our thought that hybrid work is going to push up the timeline for a lot of important changes, and some most notable and obvious of those changes are ones that pertain to the digital infrastructure. Traditional on-prem solutions are starting to be phased out much more quickly than anyone would have anticipated, being replaced with different cloud computing and data storage solutions. As a data provider, it’s more important now than ever to set yourself apart by emphasizing the source and quality of your data as well as any other aspect that sets you apart from the competition. Ensuring that you provide as much information in an easily accessible repository is key to facilitating buy-in and adoption from various stakeholders. Everything from initial introductory slides all the way to a knowledge base should be right at your clients’ fingertips.

4. Cloud computing has been widely adopted in most sectors except financial services. Is this now changing, and if so how will funds decide how and where to include external providers?

a. This does appear to be changing and that change is happening with smaller and midsize funds and firms. This can obviously partly be attributed to the fact that cloud computing is more convenient and, in most cases, economical and there are fewer systems to unwind and resources to be reallocated when starting from scratch. From a data provider standpoint, it’s incredibly important to make sure your data is available for seamless integration on any platform that a fund might choose to work with. Analyzing and prioritizing platforms and subsequently optimizing the presence there is important now, and will be mission critical in the coming quarters and years.

5. To what extent do you see the use of blockchain integrating into capital markets? Is this an area of growth and how do you see the industry working with blockchain in the future?

a. Blockchain could play a role in the alt data industry in several different ways, the most likely place we’ll see blockchain adoption is in determining data provenance. With more providers entering the market, there will be increased scrutiny around the source of various data and blockchain could potentially solve for some of this by providing an easily attainable immutable audit. With labor market data there are a number of different providers with different sets of data but the quality varies quite a bit depending on where the data comes from. Understanding the source is going to lead to better, faster outcomes and less time spent testing the validity and impact of various datasets.

6. ESG and sustainable investing is a topic that is becoming increasingly relevant in the current climate – do you believe ESG data can be used for as an alpha generation tool rather than just a risk management process? What changes are you seeing in how ESG data is being used?

a. The definition of ESG data is consistently widening, so I would say that yes, generally the employment of ESG data can be used as an alpha generating tool. Even if one is to only analyze job listings data for companies that can invest in ESG-specific roles, that in and of itself can be an indicator of the financial health of the organization which will lead to better company performance. One example of how job listings can be used as an ESG signal is to see what types of roles an organization is hiring for. Recently, LinkUp worked with an external team to analyze the last 6 years of job listings for Exxon Mobil and Toyota with a focus on ESG roles. What we found is that while both organizations posted more jobs than their peers regarding health and safety, environment engineering and pension and benefits, Toyota was consistently above the industry average particularly in posting jobs for fuel cell, battery, and electric propulsion technician roles. Taking this a step further, one could analyze the actual job descriptions in real-time and gain an understanding of the desired outcomes of these roles.