Doron Goldstein, co-head of the firm's Privacy, Data and Cybersecurity practice, was recently quoted in FundFire regarding the sharp increase in the use of alternative data—including social media posts, satellite imagery and device sensor logs—by hedge funds. While questions run rampant regarding who pays for research and legal considerations in using this data, 78 percent of managers report they are using or plan to use nontraditional data, compared to roughly 50 percent in that category last year. However, the biggest challenges firms say they encounter in working with advanced information sets are onboarding and managing data, finding relevant data and/or proving its value, and data integrity and reliability.

Many firms, in fact, still are working to understand newer data sources and the risks and potential they present, according to Doron. "The areas of concern are using unknown data sets where you're not entirely sure where the data came from," he says. "Either you do a crawl or a third party does that and obtains data from third parties in some automated manner. And the concern is that you may not have the right to use it." (Read "Hedge Funds Swarm to Alternative Data in Search for Returns," November 22, 2017)