The advancement of drone technology is enabling the hedge fund managers to widen their scope of alternative data.
FREMONT, CA: The primary goal of the hedge fund is to maximize investor returns and minimize risk. The major strength of hedge fund management lies in its ability to leverage alternative data for gaining insights. The massive amount of investment and a small number of investors enables the fund managers to invest according to a well-defined investment strategy. Increasingly, hedge fund management is encompassing the latest technologies, such as drones, to increase the scope of alternative data.
According to CNN Business, drones and satellites are increasingly used by the investors to identify the potential trends and scope of investments. For instance, energy companies do not reveal the extent of damage caused to refineries by calamities such as hurricanes. However, hedge fund managers, who have invested in the energy sector, can gather details on such developments with the help of drones, and the data can be used in investment decision-making processes. Another possible use case of drones can be in parking lots. Drones can be used to monitor how busy parking lots are at major retailers. Empty parking lots could indicate poor store traffic offering hedge funds a reason to short a retailer’s stock.
Hedge fund investors can gain a competitive edge with the help of drone technology. The technology can offer key data in advance, thereby enabling the investment firms to adjust their moves accordingly. For instance, an enterprise seeking to gain a competitive edge on a commodity can leverage drone technology to gather data across the supply chain. The drones can be deployed to monitor transportation patterns. Based on the number of transport vehicles, productivity trends can be assessed. Hedge fund investors can use the above information to decide whether to invest or not on that particular commodity.
Earlier, investment firms had to rely on the manual workforce to gather the above trends. Apart from being incomplete, such human-based assessments also required cost and time. With technologies like drones, investors can gather an enormous amount of data within a short span of time. Drone-generated insights are significantly contributing to the hedge funds and enabling the fund managers to maximize profits.