The two funds I mentioned can afford exclusivity deals. When they expire the rest of the street catches on, by then they are already on to new ones. At any given time they have multiple in the pipeline.
I worked on an exclusive dataset with citadel. It’s never as valuable, the last few years were a special case where most funds were lagging on the analytics. At this point it’s nearly democratized. Also, even if you know exactly how a company is doing that doesn’t mean the stock will follow the companies real value. The whole thing is way more complex. Two sigma also doesn’t make as much money as they claim, they’re more of a market maker.
I can also confirm this. I used to curate data and develop equities forecasts professionally for about 30 or so funds, including Citadel and Two Sigma. It’s getting harder to build a successful trading strategy based on “quantamental” analysis alone (“alternative data”) each year.
A lot of fundamental hedge funds turned to this in the early 2010s as awareness of big data became a thing, thinking they could close the performance gap with the quant funds. It didn’t work. The quant funds that purchase this data use it as only one dimension of analysis to confirm a hypothesis which has already been empirically tested across many other inputs.
I have a specific example I can talk about, because my old firm abandoned the data: I found a reliable method for predicting exactly how many Model X and Model S vehicles Tesla sold well before earnings each quarter of 2017, including complete configuration data for each vehicle. Even with that KPI in hand, I couldn’t successfully forecast where the stock would go after each earnings call.
of course it’s more complicated than that - the end product is more features that can go in to all kinds of different trading strategies. For example as you said they are a big market maker - if they can more accurately predict earnings surprises with this data then they can price options more accurately in their MM strategies. Used properly it’s a lift to everything they do.
