Interview with Herman Bots from APG Asset Management on Alternative Data Use

How does a long-term orientated investor like APG use alternative data?

Typically, I think the alternative data space is associated with short-term signals. The datasets that provide insights into the next quarterly revenues of a quick service restaurant, that’s a typical example. As a long-term investor, one would think that we wouldn’t use them so much. But if there is a change in investment case for us and we want to go and buy a stock or sell a stock, then we still have the issue of timing to deal with. Alternative data can help us with timing, so that’s one aspect.

Increasingly, we also see more and more datasets becoming available that help us get a deeper understanding. So, it’s not just timelier, but also a deeper understanding of companies that we invest in. That helps us the long-term evaluation of the companies that we invest in.

It can be about the competitive advantages that we think a company has or the management claims they have. The data also helps us have engaged dialogs with the managements of the companies (‘our data tells us that your brand awareness is falling, can you comment?’) and that helps.

From a long-term investment horizon perspective, are there specific datasets that you find particularly useful?

For example, we see relationships with customers, customer satisfaction surveys. It’s not something like ‘the customer satisfaction is falling, therefore we sell’, no. It tells us something about a new product launch or the way a company is positioning itself.

What we also see in alternative datasets nowadays is about the intellectual capital. How many patents a company holds, how we should evaluate those patents. That’s very interesting for us as long-term investors. Human capital is another one where we see new datasets emerging that are very useful in that perspective.

Where do you see opportunities for alternative data on the long-term investment process?

We see more of the above. More datasets that help us evaluate the brand strength, the human capital strength, the intellectual capital strength of the businesses. We see them emerging now and we think it will be very beneficial if we have more of those.

Why do you think some of the more longer-term investment horizon buyside firms have been slower to embrace alternative data?

I think it’s a reputational thing. Many people think we just look at the credit card panel and then go long or short ahead of the quarterly earnings and that’s what alternative data is all about. That’s maybe how it started out, but I think now there is a lot of alternative data that will be beneficial for long-term investment processes.

About Herman Bots

Herman is Head of Fundamental Equities at APG Asset Management. APG Asset Management NV is a privately owned investment manager. The firm manages pension funds for its clients and invests in the public equity, fixed income, and alternative investments markets across the globe.