Data Providers Increasingly Selling Personal Info To Hedge Funds, Private Equity Searching For Future Trends

Data is information. Information provides knowledge. Knowledge creates money. Wisdom generates profits. JL

Robin Wigglesworth reports in the Financial Times:

The rapidly growing world of big data is seen as an attractive source of information for asset managers seeking a vital investment edge, with data providers selling everything from social media chatter and emailed receipts to federal lobbying data and even satellite images from space. But several hedge funds say vendors are selling information that still contains sensitive personal information that could be used to identify individuals.
The “alternative data” industry, which sells information such as app downloads and credit card purchases to investment groups, is failing to adequately erase personal details before sharing the material, according to several hedge funds.
The rapidly growing world of big data is seen as an increasingly attractive source of information for asset managers seeking a vital investment edge, with data providers selling everything from social media chatter and emailed receipts to federal lobbying data and even satellite images from space. But several hedge funds say some vendors are selling information that still contains sensitive personal information that could be used to identify individuals.
“The vendors claim to strip out all the personal information, but we occasionally find phone numbers, zip codes and so on,” said Matthew Granade, chief market intelligence officer at Steven Cohen’s Point72. “It’s a big enough deal that we have a couple of full-time tech people wash the data ourselves.”
The head of another major hedge fund said that even when personal information had been scrubbed from a data set, it was far too easy to restore. “We were shocked at how easy it was to de-anonymise the data,” he said. “It took one of my analysts 30 minutes to discover someone who was probably having an affair.”
Sophisticated algorithmic approaches such as “machine learning” allow money managers to sift through enormous data sets for profitable patterns. Tabb Group, a consultancy, estimates that in the US alone, spending on big data will double in the next five years to $400m, while CB Insights, a data provider, has counted at least 30 start-ups in the field.
But the torrent of information being offered for sale, and the sensitivity of some of it, has raised concerns. Robert Schoshinski, assistant director in the Federal Trade Commission’s division of privacy and identity protection, said the issue was “on the FTC’s radar”.
Mr Schoshinski would not be drawn on whether there were any open investigations into misuse of personal data, citing FTC policy, but said: “It raises a number of privacy issues, given the amount of data available and how you can cross-reference it.” The Securities and Exchange Commission declined to comment.
Hedge funds stress that most vendors do a good job, and Tammer Kamel, chief executive of Quandl, a well-reputed alternative data vendor, said his company was “super zealous” about scrubbing any personal information out of its aggregated data. “No one wants to be on the wrong side of this,” he said.
Another hedge fund manager pointed out that if there were any legal issues, the litigation axe would be more likely to fall on them than the data vendors. “We are incredibly careful about licensing and privacy issues because when things go wrong legally, the plaintiffs go after the people with the money,” he said.
But there is no overarching US privacy law to protect consumers, with standards set individually by different states, industries and even companies, according to Albert Gidari, director of privacy at the Stanford Center for Internet and Society. Still, there are no signs of a backlash.
“Ultimately, history shows how willing people are to give up some privacy for some convenience,” Mr Gidari said.