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Hedge Fund Technology Budget: A blueprint to get you started

By Mary Beth Hamilton,
Thursday, January 6th, 2011

Starting a hedge fund is a time consuming process, and one area that must be well defined is a hedge fund’s budget. Hedge fund investors want to know where management fees are being allocated, so you’ll need to clearly identify your operating costs around:

  • Staffing: Payroll, taxes, health and benefit costs, etc.

  • Building and facilities: Consider office expenses and lease obligation

  • Technology: If you don’t have an in-house IT staff, ask your IT service provider to do this

  • Legal and Administrator fees

  • One time versus recurring

By understanding what your firm’s needs are going to be in the short and long term, you should be able to establish a working budget for running your firm efficiently. Envisioning how your practice will look in three or five years is essential to avoid short-sighted mistakes such as locking into a product that can’t grow with your firm.

To help with the technology budgeting process we’ve created a Hedge Fund Technology Budget Blueprint that outlines the items you should consider while building your hedge fund technology budget. Your firm may not need all these elements at launch, but planning ahead will enable you to efficiently manage operating costs.

One caution we regularly give to clients is to not underestimate how much you rely on technology. Think about the workflows and systems you use to complete your work – be it email, reports, phones, market vendor applications, and/or risk systems. Now, think about the work that will need to be done if those systems cannot scale or don’t exist in case of a disaster. More than likely, you will need most, if not all, of the same systems, including additional ones to grow your firm.

Use this hedge fund technology list as a shopping guide when growing out your technology platform as well as managing your hedge fund technology budget. Your technology partner should be able to closely quantify both your near time and long term spends.

So what’s our biggest advice to clients when it comes to technology? Be open to change – just because you’ve always used one system doesn’t mean it’s the best. You may be able to get additional functionality from another system. A seasoned technology vendor, such as Eze Castle Integration, should constantly be engaged with you on better products from a process, functionality and cost basis.

 Hedge Fund Technology Budget Snapshot

 Enterprise Infrastructure - Data + Networking

 Year 1

 Year 2

Hardware (PCs, monitors, printers/fax)


Networking (routers, switches, firewall, servers)


Desktop applications (Windows, Microsoft Office, Adobe)


Systems (accounting, trading, portfolio management, risk management, order management)


Email, IM & Bloomberg Archival


Security (Encryption, anti-virus, anti-spam)


Project labor


Total Enterprise Infrastructure - Hardware


 Enterprise Infrastructure - Telephony


 Avaya voice hardware & labor


 Trading turrets (if applicable)


 Recording/monitoring software


 Total Enterprise Infrastructure - Telephony


 Enterprise Infrastructure - Communications


 Public domains (i.e. websites)


 Primary Internet line


 Backup Internet line


 Dedicated lines (i.e. Bloomberg, Thomson Reuters, FIX)


 Total Enterprise Infrastructure - Communications


 Enterprise Infrastructure - 3rd Party Services


 Central Copier - multifunctional copier


 BlackBerry voice & data service


 Bloomberg and/or Thomson Reuters


 Verizon PRI usage including taxes


 Total Enterprise Infrastructure - Services


 Additional Services


 Disaster Recovery


 Monthly Support Service


 Total Enterprise Infrastructure - Misc.




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Categorized under: Trends We're Seeing  Hedge Fund Operations  Launching A Hedge Fund 

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