Blog Entries from 07/2010
Welcome back! Have you read Parts I and II of our Hedge Fund Operations analysis already? If so, you’ve already learned some great tips for how to optimize your hedge fund’s operations when it comes to staffing, technology, managing counterparties and budgeting. So what’s next?
Eze Castle has developed a checklist for hedge funds looking to reduce costs and optimize efficiency. Our areas to evaluate include: virtualization technology, purchasing, market data, telecommunication, broker execution costs and disaster recovery/data protection.
Cloud computing is an emerging technology model that hosts users’ data and applications in a central, web-based repository, allowing for access from any computer or mobile device with connectivity. Information is stored in a “cloud,” which eliminates the need for excessive capital expenditure on IT infrastructure and often allows for an easier ability to add additional IT resources as necessary. There are many reasons why a hedge fund should consider cloud computing.
Within the cloud model is Software as a Service (SaaS) – software that is deployed over a hosted environment and accessed via the Internet. An on-demand licensing service, SaaS enables the benefits of a comprehensively licensed application without the need to specifically equip multiple servers and infrastructures with necessary applications.
With increased focus on Web 2.0, cloud and SaaS during the current economic crisis, the emergence of hosted applications has provided firms with an alternative to traditional onsite IT infrastructures. Companies such as Google and Amazon have invaded the application hosting domain and are offering their services at a fraction of the price of most third-party IT service providers. While these are low-cost, they are not necessarily the best choices for investment firms.
This article will outline the key considerations firms should look at before turning their businesses over to free or low-cost hosted services such as those offered by Google or Amazon. Before we introduce these considerations, let’s take a look at the business models of these hosted apps providers, particularly Google.
Categorized under: Cloud Computing
Last week, in Part I of our hedge fund operations analysis, we examined the roles of staffing and technology and offered a few tips to help your fund optimize efficiency without sacrificing performance. This week, let’s take a look at two other operational facets: managing counterparties and budgeting.
President Obama signed the Financial Reform Act, which introduces new regulations for hedge funds and private equity firms. Among other things, the bill gives new authority to the federal government to monitor financial firms that have the potential to pose a systemic risk, and when necessary, seize and wind down troubled financial firms. The greater oversight is helped along by requiring hedge funds and private equity firms with greater than $150 million in AUM to register with the SEC.
Here's a video of President Obama signing the Financial Reform Bill into law.
Categorized under: Hedge Fund Regulation
Regulation has been looming over the hedge fund and private equity industry since the market collapsed in 2008. With the Senate’s approval of the Conference Report to the “Dodd-Frank Wall Street Reform and Consumer Protection Act” (H.R. 4173) on Thursday, we are one signature away from regulation and registration. Reports indicate that President Obama will be signing the sweeping regulation into law on Wednesday, July 21, 2010.
Most hedge funds have been here before. Back in December 2004, the Securities and Exchange Commission (SEC) issued a rule forcing hedge funds to register under the Investment Advisers Act by February 1, 2006. But just a few months after the rule going into effect (June 2006) and after around 2,500 hedge fund advisers had registered, the rule was struck down by the U.S. Court of Appeals.
So now that we’ve walked down memory lane, let’s take a look at what is included in the Dodd-Frank financial reform bill:
1. The big one is that hedge funds and private equity firms with greater than $150 million in AUM must register with the SEC.
Categorized under: Hedge Fund Regulation
Let’s talk Hedge Fund Operations. The investment industry is steadily rebounding from the days of economic turmoil, but hedge funds are becoming smarter and thriftier. Budgets are still tight, and with increased demands from investors and looming regulatory changes, funds now face greater challenges than ever before.
A key challenge in today’s landscape is weighing cost versus benefit when it comes to maintaining internal hedge fund operations and technology. Over the past two years, cuts have been made from personnel to infrastructure and everywhere in between, but ultimately, firms need to remain fully operational without sacrificing performance and efficiency.
So how does a firm go about maintaining their existing operations while still trimming costs and anticipating changes that cannot yet be defined? Determining what a fund should be evaluating is half the battle; developing an actionable game plan and executing it is the hard part. Today we’ll explore two of these key challenges: Hedge Fund Staffing and Hedge Fund Technology.
Categorized under: Hedge Fund Operations
This article is contributed by Richard Wilson of Hedge Fund Blogger and provides unique hedge fund marketing tactics that managers should investigate further while attempting to raise capital for their funds. The topics covered include public relations management and educational marketing.
Public relations has to be one of the most ignored marketing tools of hedge fund managers today. I have worked with over three dozen hedge funds on their marketing plans and capital raising efforts. So far, the most intense public relations effort I have seen set forth was a single press release over a four-year period. This is not to say that any hedge fund that is not publishing at least four press releases per year is doing something wrong. However, many could benefit by simply making themselves more available to the press.
The media is hungry for real time opinions of hedge fund managers, traders and marketers. They need comments on current market conditions, trends in hiring and firing of traders and portfolio managers and what prospects lay ahead for the industry as a whole. Many hedge fund managers shy away from contributing to stories in the press. I would strongly encourage you to speak with your legal counsel and see if they would approve of your discussions with the media if you stick to industry trends, general market trends and long-term movements you are seeing within the industry.
Last week we issued a press release announcing we were named to the VAR500 list, a fact that we were (are!) pretty excited about. This is our fourth year on the VAR500 and we’re proud of the fact that we keep climbing the list. This year we moved up five spots to 351. Also, it’s worth mentioning that we are the only hedge fund technology integrator on the list.
Not everyone is likely familiar with the VAR500 technology integrator list or understands why it matters, so let me fill you in. The VAR500 list is created every year by Everything Channel and identifies North America’s top technology integrators or value added resellers (VARs). It is estimated that there are nearly 90,000 VARs in North America alone, so being in the top 500, make that top 400, is a great accomplishment.
Technology heavy weights, including Microsoft, HP, Cisco and Symantec, all rely on the VAR500 to sell their products and deliver value adding solutions to end-user firms. Needless to say, those four companies are close Eze Castle Integration partners. In fact, Microsoft filmed a video about us in June 2010, which we look forward to sharing in the next month.
Categorized under: Eze Castle Milestones
Good relationships should be a key goal for any manager because they help secure and retain clients. In a previous blog entry on how to prepare for investor meetings, we cited two pillars of relationship building: credibility and rapport. A lack of credibility will give potential investors a reason not to do business with you. Strong rapport will give them every reason to do business with you. Since investor decisions often hinge on the meeting, the in-person contact that leads them to trust – or not to trust – the hedge fund manager with their money, building credibility when making a presentation is crucial. In our last blog entry, we outlined specific steps to build credibility. Today, we’ll do that for rapport, excerpted from our most recent Strategic Commentary, “It All Comes Down to the Meeting.”
Understand, and be understood. Accurately appraising and connecting with your prospect/client/investor’s situation, needs, and goals is crucial to the sales process, and will directly affect their ability to understand you. Learn to actively listen, to ask for clarification, to stop talking and answer questions. A caveat to the advice above about preparing talking points is to be prepared to go “off book” to address questions and concerns from the other side of the table. Remember, it’s not about you, it’s about them. If you want their money, you have to give them their due.
Categorized under: Hedge Fund Due Diligence
If you’re familiar with Eze Castle (and since you’re reading this blog, you probably are!), you already know that we regularly monitor the headlines for anything and everything to do with hedge funds. A topic that very regularly arises is the likelihood of regulation. Historically, hedge funds have been often misunderstood and very loosely regulated. Although it is well-known within the industry that hedge funds are not to blame for the recession, they are often the focus of regulation talk these days. This week has been especially news-worthy and even contentious.
June 25, 2010: House-Senate panel announced acceptance of revisions to the “Wall Street Reform and Consumer Protection Act,” which will require many investment advisers to register with the SEC. It will also impose new disclosure and recordkeeping requirements on these advisers. For more information on this act, please read Bingham McCutchen’s recent Client Alert.
Categorized under: Hedge Fund Regulation