The strategy uses big data on consumer trends to identify earnings' surprises and capture alpha potential.

Lombard Odier Investment Managers (LOIM) has made its DataEdge strategy open to external investors. The market-neutral alternatives strategy combines big data analysis and investment expertise to identify trends in consumer behaviour and its impact on company earnings forecasts, in order to capture alpha opportunities for investors.

LOIM’s DataEdge is an equity market neutral strategy, with a differentiated investment framework, which uncovers alpha potential by applying an information edge to stock picking, the firm said in a statement.

The strategy, launched three years ago, is now opening to external investors for the first time through a UCITS' format. It relies on the analysis of alternative data points across multiple geographies, sectors and sources, including credit card transactions, digital receipts, web traffic, and activity on apps and geolocation services. This data is structured and filtered to identify consumer behaviour trends in real time, the firm added.

Systematic and quantitative analysis methods are then applied to predict how patterns could affect the key performance indicators of listed companies, such as sales, revenues and new customers, as well as tracking inflection points in the trends of KPIs over several quarters. This information edge improves the forecasting of company results, enabling better prediction of earnings surprises, capturing alpha potential.

“The investment universe is currently US-centric, and predominantly focuses on small to mid-cap companies across consumer, technology, industrial and healthcare sectors,” the firm said. The strategy monitors almost 700 companies daily to create a contrarian and diversified portfolio of 200 to 250 active stocks, where the firm sees potential for divergence between company results and market expectations, therefore generating alpha potential.

The DataEdge strategy is managed by co-lead portfolio managers, Laurent Joué and Marc Pellaud, who have a combined 36 years of experience in systematic alternatives strategies. Along with LOIM’s quantitative investment team of 21 professionals, they manage more than $10 billion.

“The DataEdge strategy is an important addition to LOIM’s range of hedge fund strategies. With the DataEdge strategy, we are combining tested, disciplined investment processes with new data sources to offer investors a differentiated market-neutral strategy and compelling potential returns,” Jean-Pascal Porcherot, co-head of LOIM and managing partner at Lombard Odier, said.

Lombard Odier Investment Managers is the institutional asset management business of Swiss private bank Lombard Odier, which provides a range of investment solutions spanning fixed income, convertible bonds, equities, multi-asset, and alternatives. It has a network of 13 offices across Europe, Asia and North America, with assets under management of $70 billion.