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Hedge Fund’s Big Short Shows Why Demand for Alt-Data Is Surging

Repost : Bloomberg.com

Author: Lulu Yilun Chen and Bei Hu

Before the coronavirus sent stock markets tumbling at the fastest pace since the 2008 financial crisis, Dymon Asia Capital (Singapore) Pte sensed trouble.

The hedge fund firm was combining information on past outbreaks with a raft of so-called alternative data, including Google searches in the U.S. and daily readings from China on everything from road congestion to flight schedules and test-kit availability. The numbers convinced Dymon to take short positions against the S&P 500 and an index of Chinese stocks in Hong Kong, trades that would become its biggest money makers in February and March.

“It was clear the market was under-pricing the impact of Covid-19,” Danny Yong, Dymon’s chief investment officer, said in an interview. The firm’s flagship $2 billion Dymon Asia Macro Fund has climbed about 40% this year.

While investors like Yong have been using alternative data for years, the coronavirus has prompted a fresh surge in demand for off-the-beaten-path statistics that might shed light on the pandemic’s impact on economies and markets. Interest in Chinese data has been particularly strong as money managers try to get an early read on efforts to contain the virus and reboot the world’s second-largest economy.

“After the outbreak, we saw a spike in demand for data to show what was really happening in China,” said Hong Kong-based Heatherm Huang, co-founder of Measurable AI, a company that tracks business receipts sent via its email-aggregator service. “Now, investors want to know how fast Chinese companies and the economy can recover.”

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