Investors are starting to freak out about the amount of their activity that's being monitored and monetized by investment banks
- Alternative data sets have already come under scrutiny for questionable origins and potential legal issues.
- Now, some executives are raising alarm bells about how investment banks package up and sell supposedly anonymized data about buyside behavior.
- One JPMorgan executive cautioned that 'everything we do on the buy side' is being tracked by the sell side.
Investors need to be more careful than ever about how they click, talk, and type. Investment banks are watching.
At a fixed income conference in New York this week, executives cautioned that Wall Street firms are increasingly packaging up investor data, anonymizing it, then selling it, in some cases back to the buy side.
"We all need to be extremely aware that everything we do on the buy side, every voice conversation, every click, every phone call is captured by the sell side," said Russell Budnick, JPMorgan Global Wealth Management's head of credit trading in the US and EMEA.
"We need to be very cognizant of tools … being utilized not only to improve our internal workflow, but put into a [customer relationship manager] to cover us better or to capture our data and predict what we'll do next. We need to make sure our processes are aware of that."
Asset managers are increasingly turning a variety of information into alternative data sets, such as what types of customers have been historically interested in certain bonds.
Investors, for their part, are also asking for more data on their own behavior, including quotes, trades, and other information, for their increasingly complex compliance needs.
"The sell side and the buy side need to have a conversation about data and ownership," said Anthony Tassone, the founder of communications platform GreenKey. "If we back up a little bit, with the exposure to machine learning and data scientists, the sell side is hiring data scientists like they were developers 15 years ago. There's an explosion of unstructured data at these institutions."
Sign up here for our weekly newsletter Wall Street Insider, a behind-the-scenes look at the stories dominating banking, business, and big deals.
The comments echo those made by JPMorgan co-president Daniel Pinto who told Business Insider at the World Economic Forum in Davos in January that while many clients like the analytics banks are providing around their own data, customers are incredibly uneasy about having their own data shared with others.
"You need to be very careful to protect client privacy," Pinto said then. "A lot of clients don't want their data used elsewhere, even in aggregate."
One investment executive, who asked to remain anonymous, told Business Insider at the conference that his multinational firm is struggling with overlapping regulations around data and confusion around direction.
"Where's our obligation: to shareholders? Regulators? Clients? The buy side might have assumed what they were doing was private, but who knows," he said. "Nobody knows what to do. We're all making it up as we go."
- Read more:
- Investment managers are touting tech buzzwords like 'big data' and 'AI' to win business. It's not working
- $650 billion asset manager Franklin Templeton is embedding data scientists in a key investment team, and it's a sign of how the industry is changing
- A $27 billion private-equity investor is betting a handful of data geeks will determine who wins the biggest deals
- Citigroup has found a new way to offer hedge funds obscure data that can give them an edge - and it's part of a $2 billion investing gold rush