Demand for private market data is expected to continue rising as the growing popularity of the asset classes accelerates, putting pressure on feed prices.
With no end in sight to market volatility and artificial intelligence enabling the sourcing of ever-larger volumes of critical financial and operational information, financial institutions are likely to increase their data budgets, according to Substantive Research.
“There is a tax to pay if you want to enter this market with all the potential rewards,” Mike Carrodus, chief executive at London-based Substantive Research, told Data Management Insight. “It’s got a lot more interesting recently in terms of people needing to be up to speed with the latest and most impactful data sets because prices are going up fast.”Data is gobbling up ever larger chunks of institutions’ expenditure as their processes become more dependent on digital information and as technology enables the extraction of data from unstructured sources. Costs have also risen as a result of organisations buying in data from multiple vendors. According to research by Deloitte last year, a third of all banks spend more than US$5 million on market data alone.
Novel Data Sets Attract Higher Fees
Private market data, however, carries a premium for its novelty and the niche profiles of providers who often specialise in one of the many asset classes within the space, including credit, equity, loans, real estate and hedge funds. Many such vendors are startups in the growth phase of their evolution and are aggressively pricing their products, Czarina Reinate, head of market data and ESG analytics at Substantive Research, told Data Management Insight.
“New entrants’ singular focus on a niche market gives them a data advantage over incumbents, whose datasets are often the result of acquisitions rather than dedicated, organic development,” Reinate said.
The cost of private market data rose 10 per cent last year, according to research by Substantive and BCG Expand, down from 18 per cent in 2023 and 15 per cent in 2024. Even so, that was still a steeper increase than the 5.2 per cent expansion in data budgets over the same period.
The report’s authors said that the decline was the result of buyers becoming more assertive in their contract negotiations and reassessing longstanding services. It also attributed the tailing off to vendors testing new commercial models.
Nevertheless, Substantive Research said that contract renewals were being more aggressively priced as vendors capitalised on the intense demand for their products. In those instances, price rises of around 40 per cent have been reported, with vendors – predominantly new entrants to the market – presenting a “take-it-or-leave-it” approach to contract negotiations.Wide Pricing Disparities
The immaturity of the private markets data sector has also led to wide disparities in the pricing of information, with some clients paying six times more than peers for the same private credit data. The vendors that had been bought by incumbent data providers acted less aggressively than newcomers to the space, the study found.
Even so, the expectation of lower pricing as providers expand and achieve economies of scale has yet to be seen.
“It’s like the wild west out there,” said Reinate.
The reason for such inconsistencies in pricing is the lack of transparency in the private markets data ecosystem. Like the markets on which they seek to shine a light, the data vendors operate away from open scrutiny. Index, ratings and ESG data experiences similar inconsistencies, whereas exchange-provided data is more evenly priced because they are obliged to be transparent in how they price their products.
“The one reality in these markets is opacity when it comes to the way things are negotiated and priced and therefore it’s opportunistic and because of their hold on certain data sets that will probably continue,” said Carrodus.
“Very few organisations are 100 per cent consistent when it comes to pricing consistency,” he added. “There are lots of discounts going on in everything you buy. It’s the question of the delta. And what we’re seeing with these studies is that the delta is large, and therefore consumers have the right to be concerned.”
Optimistically, Substantive Research does expect buyers will become more hard-nosed in their negotiations and shop around more to bring down costs. But the discounts won’t be huge.
“The volatility in the market that we’re going to be seeing this year is only going to make people want to have as much access to the right data as possible,” said Carrodus. “So this isn’t going to be a market to go into without the right tools.”
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