Lowenstein Sandler’s Investment Management Group has released its 2025 Alternative Data Report, entitled “Alternative Data’s Integration into AI Fuels New Opportunities and Challenges,”and authored by Scott H. Moss, Chair of Lowenstein’s Fund Regulatory & Compliance practice and Co-chair of the firm’s Investment Management Group; Boris Liberman, Chair of the firm’s Derivatives & Structured Products practice; and George Danenhauer, counsel in the firm’s Investment Management Group.
The Report, the firm’s sixth such survey since 2019, details how the accelerated integration of alternative data and artificial intelligence (AI) is reshaping investment research, portfolio monitoring, and decision-making across hedge funds, private equity funds, and venture capital funds; it shows widespread adoption and significant budget growth, as well as heightened governance and risk considerations as firms operationalize AI to extract value from complex datasets.
This year’s Report finds that adoption of alternative data continues to surge: 90 percent of respondents report currently using alternative data, up from 67 percent last year and 62 percent in 2023. Alongside this expansion, AI has become central to operations, with 100 percent of respondents reporting moderate or large-scale use of AI systems for investment research, portfolio optimization, and trading.
89 percent of respondents also state that their alt data providers are fully or mostly enabling AI analysis or interaction within their products, resulting in a more complex commercial and licensing environment and requiring tighter terms and greater restrictions. Pricing has been impacted: 81 percent of respondents saw cost increases for alternative data products that incorporate AI tools.
Despite increasing cost headwinds, momentum remains strong—89 percent of firms plan to increase their budgets for alternative data, and 96 percent plan to increase budgets for AI in 2026, signaling a sustained competitive race to secure data-driven advantages. Market dynamics reinforce this trajectory: the Report cites estimates from intelligence firm Neudata that the alternative data market for investment managers could reach nearly $40 billion by 2030, double its current size.
“Like practically every segment of the economy, alternative investment is being reshaped by AI,” says Moss. “Investment firms are leveraging AI throughout their businesses, deriving new insights from the data they collect to make decisions. But effective adoption is not simple.” He adds: “The real edge comes from disciplined governance and thoughtful integration with high quality data. Firms that pair robust controls with experimentation are best positioned to do well while managing the risks associated with evolving government regulations, data rights, and MNPI.”
Other significant findings in this year’s Report include:
- AI has expanded the value of unconventional data sources such as satellite imagery and credit card transactions, enabling investors to process larger datasets, combine alternative and traditional metrics, and surface new connections that can enhance alpha generation.
- More firms are formalizing governance: nearly nine in ten respondents report having formal AI policies for investment and trading use, reflecting an industry-wide recognition of risks associated with data security, regulatory scrutiny, vendor reliability, and the potential for exposure to material nonpublic information.
- Many firms are actively developing custom/bespoke AI systems
and sourcing data both internally and externally, balancing cost,
speed, and strategic advantage as they scale their analytics
capabilities.
For the full Report, click here.