The current buzzword, fake news, begs the question, how often does one encounter fake news? It must occur with some degree of frequency, because pollsters report that two-thirds of the American public believes the mass media peddles fake news. There are larger questions. Is fake news the result of carelessness or is it done intentionally? How does one identify it? What can Americans do to combat it?

The much-touted information age, which arose in concert with social media and an ever-expanding internet, has given a voice to anyone with the time and inclination to sit at a keyboard. This has not only made fake news possible but, in fact, prevalent.

Fake by Omission

Here is one example that illustrates fake news by omission. This article purports to address the top 15 highest paying jobs in America. Our readers will be stunned to see that the news article makes no mention of any occupation in the hedge fund industry. The highest salary plus bonus is said to be that of an orthopedic surgeon, whose median salary and bonus total $450 thousand.

Anyone that has read the 2017 Hedge Fund Compensation Report is keenly aware that the article in question has major omissions. For example, the compensation report lists the total annual compensation for a legal/compliance officer in the hedge fund industry at $484 thousand, $34 thousand more than the median for an orthopedic surgeon, which the article names as the highest paying job in the land.

Identifying Fake News

Although one can make a credible argument that the Internet is the culprit behind fake news, it must also be said that the Internet offers the best hope of debunking fake news. The problem is that most people tend to take what they read at face value, particularly if what they are reading reflects their personal beliefs.

News articles that rely heavily on statistics and percentages should be viewed with a skeptic’s eye. For example, a small community that suffers one robbery in 2015 suddenly sees a rise of 100 percent in the robbery rate in 2016. While that sounds horrendous and makes for a gripping headline, the fact remains that there were but two robberies in 2016. Statistics are another source of concern. It is entirely possible for one to drown in a lake with a mean average depth of three inches.

Combating Fake News

Sadly, the only way to combat fake news is through independent research. Not everything one reads is deserving of fact checking. One has to choose his battles. If the news affects one personally, in that life-altering decisions are going to be made based on the information, of course, prudence dictates that one research and verify the facts as they are presented. The Internet makes this possible.

What about Hedge Fund Jobs?

The aforementioned Hedge Fund Compensation Report revealed twelve hedge fund jobs that have higher median pay than the fifteen jobs listed in the article. No one is suggesting that the omission of these jobs in the article was intentional. However, this is important information for anyone making a career choice and highlights the importance of doing one’s due diligence when making a life-changing decision such as a career path.

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The digital age created revolutions in a variety of industries, including the retail, banking, motion picture and music industries. The rise of alternative data vendors also holds the potential of a similar revolution in the hedge fund industry.

Hedge funds are always on the make for an edge in the markets and alternative data vendors are a promising source for just such an edge. Take the example of sportswear maker Under Armour. In early August, the company announced a second straight quarter of losses, trimmed its sales outlook, announced a restructuring plan and warned that 2017 operating profits would be down by 50 percent. While this was a shock to many of Under Armour’s investors, a select group of hedge funds had purchased data on the company from alternative data vendors—data that pointed to the company’s falling fortunes.

What Is an Alternative Data Vendor?

Alternative data vendors are firms that troll through the ocean of digital information churned out by people, companies and countries in the normal course of business and then refine it into useful intelligence.

In the Under Armour example, alternative data vendors detected a downturn in job listings on Under Armour’s website, a dip in the average price of its clothing and unfavorable reviews of its CEO by Under Armour employees at the recruiting site, Glassdoor.

It doesn’t take a hedge fund guru to see value in this type of data and, according to alternativedata.org, the number of providers has more than tripled since 2010 in response to demand.

Three Principal Types of Alternative Data

The first is website “scraping” by which vendors scrape public websites for information that might prove valuable. These scrapes range from the frequency of application downloads and the results of user reviews to airline and hotel bookings. Social media sites are tapped for insights into consumer trends and online purchases are monitored, to cite a few examples.

The second type is credit card tracking which shows definitively what consumers are buying.

Third, is the geo-location data provided by smartphones. This data provides invaluable insights into where consumers are shopping, eating and travelling.

The Downside

At this juncture, the alternative data industry is largely unregulated. Hedge funds are rightly concerned that information, which may appear to be public, is, in fact, private and therefore legally protected. Another area that is concerning to hedge funds is that the exclusivity of the information is essential to achieving the edge that hedge funds seek. Obviously, if every hedge fund has access to the information, no competitive advantage is in play. Unfortunately, exclusivity raises the antennae of regulators, opening hedge funds to a greater level of scrutiny, in what is already a grey legal area.

What about Hedge Fund Jobs?

Any innovation that holds the promise of enhanced hedge fund performance can only be positive for hedge fund jobs. It is no stretch to suggest that expertise in data analytics and other related disciplines will grow in proportion to the traction gained by alternative data vendors with the hedge fund industry.

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Can You Write Your Way into a Hedge Fund Job?

October 16, 2017

People of diverse backgrounds have found a home in the hedge fund industry – lawyers, computer scientists, investment bankers and public accountants, to cite a few. According to the 2017 Hedge Fund Compensation Report, the previous professional backgrounds of about 14 percent of hedge fund professionals are lumped into an amorphous category termed “other”, which […]

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NYC Job Seekers Need to Prepare for a Change in the Law

October 2, 2017

Have you heard? In an effort to close the wage-gap between men and women in the workplace, New York City Mayor Bill de Blasio (D) signed an amendment to the New York City Human Rights Law. This law takes effect on Halloween. Commencing October 31, no employer may inquire into the salary history of prospective […]

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Investor Confidence in Hedge Funds Continues to Soar

September 18, 2017

Prequin reports the hedge fund industry has achieved gains in positive territory for 10 months in a row, with aggregate August gains of 0.97 percent. This is the longest streak of month-to-month gains since the financial crisis, and suggests the hedge fund industry has finally found its feet. Investors Are Taking Notice As has been […]

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Hedge Funds Are Not the Dark Side of the Force

September 4, 2017

Financial journalists have made an easy living writing articles on hedge funds based upon a formula. Just as formula writing results in some of the shallower situation comedies in television history, formula hedge fund articles fail to inform potential investors in a comprehensive manner. Such articles follow the following formula. Step One Create a chart […]

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Are You a Woman Struggling to Snare a Job in Hedge Funds?

August 21, 2017

Male portfolio managers outnumber women 20 to 1. This might suggest gender bias on the part of hedge funds. However, it might also suggest that women aren’t seeking this line of work. How can the facts be known? For example, 34 percent of doctors in the United States are female, about one in three. According […]

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