IHS Markit Builds Out Alt Data Library for Research Signals

IHS Markit is broadening its coverage of alternative datasets for Research Signals, its library of data signals, to provide actionable insights on investment themes such as cybersecurity, maritime movements, and the automotive industry.

As one example, the London-based data services provider is leveraging information from cybersecurity ratings firm BitSight, to develop signals for portfolio managers to use in evaluating the risk of investing in a company or sector. BitSight pulls data from publicly available information—including security breaches, compromised systems, vulnerabilities, user behavior, the company structure and operations— across 170,000 organizations, and quantifies a risk score for an individual firm, similar to a credit rating.

IHS Markit then pulls the thousands of data points into its data lake, normalizes the data, maps it to other identifiers, tests it and creates actionable signals to be made available to clients to inform trading strategies and create company risk profiles.

Users who want to gain insight from alternative datasets may be daunted by the time, effort and resources needed to source the data, extract valuable insights and translate those into worthy returns.

Finding that balance between cost and value can be tricky, says Swetam Gungah, product specialist for Research Signals at IHS Markit.

“There are many datasets in the market and it can be hard to find the right source,” he says. “You have to interview a lot of providers, test the data and all of that takes time and resources. Let’s imagine you do find the right data, you now have to build the factor with the raw inputs, put it all together again and test to see if it actually works. If it does, you’re now in a position to pick those stocks and manage the portfolio to see how it [the portfolio] works on a monthly, quarterly or yearly basis.”

IHS Markit backtests the performance of the data signals by running them through synthetic portfolios and trading scenarios. This analysis is then used to show clients how the signals can be incorporated into their trading strategies.

The alt data insights are provided daily using a file transfer protocol or via the Research Signals platform.

Gungah says that alternative data, such as data on cyber risk, are particularly valuable when a portfolio manager has a historical view of the signals over time and the ability to map events, such as a data breach, to changes in share price valuations. Another piece of advice, he says, is using data that will be available, relevant or useful over a long period of time to help build out a strong portfolio.

The data services vendor is enhancing Research Signals to enable buy-side clients to map traditional and alternative data signals to create holistic profiles of individual companies and sectors, and eventually be able to manage portfolios on the platform.

However, Gungah says that this is still very much in the early stages of development.

ESG and Controversies Data

As part of the broader build-out of alternative data sets, IHS Markit is adding to its environmental, social and governance (ESG) data products for Research Signals.

The provider is working with Refinitiv’s Asset4 to deliver insights around controversy data, taken from sources such as negative media, online sentiment, information about employee turnover and gender and diversity ratios.

Refinitiv’s Asset4 provides an ESGC rating score, the C standing for “controversies”, across 7,000 companies globally, with a time series going back to 2002, according to a Refinitiv report on ESG scores.

IHS Markit is still at the stage of testing and evaluating the controversies data inputs so that it can develop signals for them in the platform.

“We have to validate these inputs, first of all, quantify them, and secondly, we have to decide whether they’re going to be good inputs to develop factors and whether they [the factors] will actually work on a consistent basis,” Gungah says. 

IHS Markit aims to start rolling out some of its new ESGC signals before the end of the year.