How Hedge Funds and Investors Use Human Capital Data to Gain an Edge

TLDR:  Hedge funds and investors are increasingly utilizing human capital data, including employee turnover, sentiment, hiring trends, and compensation, to forecast company performance. These insights now inform investment products, such as BMO’s new Human Capital Factor US Equity ETF (trading as ZHC), which invests in U.S. firms with strong workforce cultures. Tools such as Aura enable near real-time monitoring of workforce shifts, providing a sharper edge than traditional financial metrics alone.

Why Human Capital Data Is the New Frontier in Hedge Fund Strategy

In today’s hyper-competitive markets, information is currency. For hedge funds and investors seeking any possible advantage, alternative data has become essential. At the center of this shift is an unlikely yet powerful asset: human capital data. From online profile aggregation to employee sentiment scores, these insights into how companies hire, retain, and engage their people are being used to predict performance, signal risk, and inform billion-dollar trades.

Want to see how your workforce data stacks up? Book a demo with Aura to explore hedge fund-grade insights on attrition, hiring, and team structure.

The Rise of Human Capital Data in Investing

By 2024, 67% of investment managers across hedge funds, private equity, and VC reported using alternative data. Among those already using it, 94% plan to increase their budgets. That’s not a fad; that’s a permanent shift in investment strategy.

Within this alt-data boom, human capital intelligence has carved out a solid niche. Hedge funds now purchase datasets that aggregate everything from job postings and hiring trends to attrition rates and compensation data, often updated monthly and mapped to public tickers. The goal? To understand what’s really happening inside companies before waiting to listen to the earnings calls.

Types of Human Capital Data Used by Hedge Funds

1. Employee Turnover: Firms track professional profiles and public sources to estimate the number of employees joining or leaving a company each month. In a 2022 paper published in Management Science by Li, Lourie, Nekrasov, and Shevlin, researchers found that higher employee turnover was significantly associated with lower future firm performance. This was particularly true for younger or smaller companies. In essence, when employees leave, it often precedes disappointing financial results.

2. Job Postings and Hiring Trends: Hedge funds scrape job boards and company career pages to detect growth strategies. A sudden surge in job ads for AI engineers? That might indicate a stealth pivot or new initiative. One hedge fund employed this approach in 2019 to gain an edge ahead of a tech firm’s AI announcement, buying shares early and capitalizing on the upside when the strategy was officially revealed.

3. Employee Sentiment: Platforms like Glassdoor and Blind offer real-time windows into how employees feel about leadership, culture, and compensation. A study in Journal of Financial Economics by Green, Huang, Wen, and Zhou found that improving Glassdoor scores correlated with stronger financial results, especially when employees rated leadership and growth opportunities highly. Over an eight-year period, firms with high employee satisfaction outperformed the market by 1.35% annually.

4. Compensation and Skills: Some datasets analyze compensation trends and skills requirements to reveal cost pressures and strategic shifts. For instance, a company dramatically raising salaries in job postings might face margin compression. Similarly, a legacy firm hiring cloud engineers signals a tech transformation. Hedge funds and investment firms monitor these changes to assess future profitability.

Real-World Applications

Avoiding Disaster: A fund identified a portfolio company experiencing rising employee attrition and declining headcount compared to its peers. After a deeper investigation, they discovered internal management issues and quietly exited the position, thereby avoiding a later earnings miss.

Activism with Data: When Engine No. 1 launched its 2021 activist campaign against ExxonMobil, it highlighted the company's poor employee morale and high attrition rates. At the time, Exxon’s attrition was nearly double that of its peers. The campaign successfully replaced several board members and repositioned the company.

Factor Investing: Harbor Capital launched the Corporate Culture Leaders ETF (HAPY) in 2022, based entirely on human capital metrics. Built using data from Irrational Capital and co-founded by behavioral scientist Dan Ariely, the fund scores companies based on employee trust, motivation, and perceived purpose. J.P. Morgan's Quantitative Research found that a human capital factor strategy offered the highest return and lowest volatility among U.S. equity factors.

Breaking News: BMO Launches Human Capital Factor ETF On June 12, 2025, BMO Asset Management announced the launch of the BMO Human Capital Factor US Equity ETF (Cboe Canada: ZHC). This new ETF is specifically designed to provide long-term capital appreciation by investing in U.S. companies that demonstrate a strong corporate culture. The fund leverages proprietary methodologies from Irrational Capital, using non-financial human capital metrics such as:

• Direct managerial relationships

• Organizational alignment

• Engagement and innovation

• Emotional connection and motivation

BMO joins a growing list of asset managers betting on the link between human capital and equity performance. With ZHC now trading on Cboe Canada, this move further validates that workforce culture is being treated as a quantifiable investment factor.

Why Human Capital Metrics Predict Financial Outperformance

People drive performance. Yet traditional metrics like EPS or P/E ratios can miss signals that workforce data reveals. High turnover? Red flag. Surging hiring for a new vertical? Opportunity. Plummeting morale? Risk of resignation waves and underperformance.

The Technology Powering Human Capital Data for Investors

To collect this data, funds use web scrapers, APIs, and third-party vendors that transform millions of messy data points into clean, time-series datasets mapped to tickers. The result: hedge funds and investors can monitor company workforce dynamics as easily as they track earnings or stock prices.

The Limitations and Risks of Using Human Capital Data

• Data Quality: Not every job posting results in a real hire. Not every Glassdoor review is authentic. Funds must clean and validate data to avoid false signals.

• Lag Time: Some human capital signals are lagging indicators, especially in slow-moving sectors.

• Correlation vs. Causation: A company might have poor Glassdoor reviews yet outperform due to other factors. Human capital data is a tool, not a crystal ball.

The Future of Investing with Human Capital Intelligence

Expect greater integration of human capital insights into multi-factor models. As datasets grow more granular, real-time, and AI-enabled, hedge funds will expand beyond simple turnover metrics to analyze team structures, manager-to-staff ratios, internal mobility, and even diversity patterns.

Firms like Irrational Capital are already doing this at scale. They believe that employee alignment (how much employees feel trusted, inspired, and valued) is directly correlated with shareholder value. And now, they have a live ETF to back it up, with BMO's ZHC further proving institutional demand.

Human Capital Data Is the Hedge Fund Alpha Edge

In the battle for alpha, human capital data has emerged as a legitimate weapon. It doesn’t replace traditional analysis,  but enhances it. Today’s smartest hedge funds use workforce intelligence to:

• Spot trouble before the market does

• Catch tailwinds early by tracking hiring

• Adjust valuations based on morale and retention trends

The results speak for themselves. Hedge funds and investors willing to look beyond balance sheets can potentially achieve higher returns, better timing, and more intelligent risk management.

Looking to leverage human capital intelligence in your strategy? Book a personalized demo with Aura and see how our insights help investors stay ahead.