Hedge funds spend billions of dollars a year on alternative data. A new product is hoping to give investors an edge.

Eric Thayer/Reuters

1010data's new consumer spending database can track how crazy Black Friday is at Macy's.

• 1010data, an alternative data provider used by dozens of hedge funds, is launching a new platform that combines data from credit cards, foot traffic, cell phone geolocation technology and retailers' websites to give investors an edge.
• Nearly four out of every five hedge funds use alternative data, and the $3 billion industry is estimated to grow as much as 20% annually.

After a rocky year for hedge funds, managers - especially in the stock-picking space - are under more pressure than ever to find unique datasets that will give them an edge.

Nearly four out of every five hedge funds use alternative data, according to a November 2017 report by EY, and the most popular data streams, like credit card spending numbers, and data providers have become table stakes.

Now, 1010data, a New York-based alternative data provider used by dozens of hedge funds, has rolled out a new, comprehensive customer transaction database that combines a number of different data sets.

Using a combination of credit card spending data, website traffic numbers and cell phone geolocation info, 1010data's TickerView Visits database tracks what more than 25 million consumers are spending their money on.

For example, a hedge fund analyst tracking a brick-and-mortar retailer can determine how many customers are buying online vs. shopping in-person, as well as what time of the day they are coming into the store and for how long.

The new conglomerate of data is helpful for hedge funds and other managers tracking retail companies because a single dataset does not always tell the full story, said Andy Mantis, senior VP of 1010data.

"If you're a cash-centric business, then credit and debit card data will only capture a part of that," Mantis said. The geolocation data 1010data uses, Mantis said, can break down how many people are buying products online but picking up in store - a figure that website traffic alone would not be able to tell you.

2018 was one the worst years ever for hedge funds in 20 years, and the alternative data space is primed to explode as managers become desperate to justify their fees, say industry experts. IBM found in a 2018 report that 90% of alternative datasets available to purchase today have been created in the last two years, and AlternativeData.Org puts the industry at roughly 375 providers.

And more established data providers have made moves to defend their turf against newcomers, such as Nasdaq's acquisitions of alternative data providers Quandl and eVestment in the last two years.

JPMorgan estimates that asset managers are collectively spending from $2 billion to $3 billion annually on such data, and that spending is estimated to grow 10% to 20% each year.