Hedge funds grapple with ai-driven data quality concerns

A Neudata survey reveals that a third of investors report declining data quality over the past two years, with some blaming artificial intelligence. Data is vital for hedge funds, which have long used alternative data sources. The rise of AI has increased data vendors, as the technology simplifies data collection and sorting. However, data quality has come under scrutiny. Daniel Entrup of AggKnowledge notes AI affects data quality by generating or mapping data and reducing the number of data quality specialists. Daryl Smith of Neudata highlights that AI-generated data often lacks transparency, complicating regulatory compliance for hedge funds. Many funds prefer internal data processing over vendors' AI models, which are seen as less trustworthy. Entrup observes a rise in basic data hygiene issues as the industry shifts to AI applications. He stresses that data quality remains crucial for hedge funds, as even a single error can compromise an entire dataset. Despite growing AI use in data processing, vendors adopting these tools have not seen significant revenue growth. One hedge fund manager warns that a single AI hallucination can render a dataset unusable, highlighting the risks of relying on AI for data integrity.