People take vacations. Companies don’t.
Hedge funds, just like most financial firms, need staff to run their technology, handle special projects, build (and manage) complex applications and of course execute core business activities. But in many cases it is not realistic or cost-effective to keep everything in-house. Enter outsourced staffing.
Outsourced staffing options for hedge funds abound. So let’s take a look at five common outsourcing practices. If you want to learn about other areas to outsource your hedge fund's technology, read our Manager's Guide to Outsourcing here.
This article first appeared in HFMWeek's Special Report: How to Start a Hedge Fund in the EU 2015.
HFMWeek catches up with Eze Castle Integration’s executive director, Dean Hill, to discuss the importance of selecting the right business service providers and the key technology factors new funds must consider when starting out in the EU.
HFMWeek (HFM): Are you seeing a healthy market for new hedge fund launches in the EU?
Dean Hill (DH): Yes. I think going into 2016 we will see an increase in terms of the amount of new hedge fund launches across the UK and European markets. Not only are these launches coming more frequently, but their size, structure and launch AuM is greater than anything we have seen in the last two-to-three years. It is certainly on the uptake.
As cloud services continue to become increasingly popular among hedge funds and investment firms, there still seems to be an area of confusion that surrounds this technology. We've talked through Why Cloud Computing is Right for your Hedge Fund and Understanding Public, Private, and Hybrid Clouds. Now, let's look at three key elements to consider within the cloud: Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS).
In a SaaS model, firms are offered a complete range of applications via the Internet, all of which are managed by the hedge fund cloud provider. This means firms can forego upfront investments in servers and software licenses and pay a predictable per-user, per-month fee.
PaaS is the delivery of a computing platform over the Internet. The PaaS model enables hedge funds to create Web applications quickly without incurring the cost and complexity of buying and managing the underlying software and hardware. Firms have control over the deployed applications and environment-related settings. PaaS is great for firms creating or managing their own applications or looking for testing and development environments.
Among the many technology decisions your firm will face during the launch phase is selecting the appropriate telecommunications needs to power daily operations. High-speed Internet and voice connectivity are necessary to access market data feeds, communicate with investors and facilitate trade orders and other investment decisions. To help you make an informed decision about your voice and Internet needs, we’ve provided a few suggestions below.
The Internet, of course, is an essential vehicle for collecting and distributing market data, as well as communicating with your clients, investors and partners via email. You’ll likely find four Internet access choices, depending on availability in your area. There are benefits and drawbacks to each, as described below.
Following is an excerpt from our 21-page Guide to Hedge Fund Technology Outsourcing. Skip ahead and download the full paper HERE.
As technology continues to grow as an important competitive differentiator for hedge funds and investment firms, funds are continuing to leverage technology outsourcing as part of their operational strategies.
A variety of circumstances in the industry have driven this move to outsourcing including:
The changing economic environment as a result of the financial crisis;
Increased investor focus on transparency and operational risk; and
Rising overheard costs relative to owning, maintaining and monitoring one’s own technology infrastructure.
Hedge funds and investment firms can leverage outsourcing in a variety of ways – everything from help desks to document management, virtual Chief Technology Officers and other staff to disaster recovery plans, FIX connectivity and more. But regardless of the specific elements being outsourced, funds should look for a few baseline requirements as part of an outsourcing solution:
A secure physical infrastructure;
Efficient and reliable communications;
Data protection; and
Vendor strength and stability.
On September 15, 2015, the SEC’s Office of Compliance Inspections and Examinations (OCIE) issued a Risk Alert providing additional guidance on key focus areas for round two of its cybersecurity examinations. Specifically OCIE stated exams will “involve more testing to assess implementation of firm procedures and controls.” The Commission intends to focus on the following areas as a means to collect information on cybersecurity-related controls and assess the controls in place at firms:
Governance and Risk Assessment: According to the Alert, OCIE may evaluate the governance and risk assessment process for areas including, but not limited to, access control, employee training, third-party/vendor management and IT systems management. Examiners also expect to see that assessments and associated policies are specific to a firm’s business.
Access Rights and Controls: OCIE warns that the lack of basic access controls and user management policies can result in unauthorized access to systems and information. Examiners may request details on how a firm manages user rights and what supporting technologies are in place.
Eze Video Debut!
Ever wonder about the layers of security encasing our Eze Managed Suite solution? We thought you had. That's why we created this video, which outlines not only the security protections but also the extensive services available to investment firms and hedge funds that move to our premier cloud solution.
Watch, learn and then contact us for more details.
So we all know hedge funds and investment firms don’t want their important information drifting around free file sharing services like Dropbox. Heck, even Dropbox’s Chief Operating Officer says they still have to convince businesses that “the enterprise features that [they’ve] built satisfy [business] security requirements and [business] needs.1”
With security threats multiplying exponentially, satisfying security requirements isn't enough - vendors need to be one step ahead. That’s why for secure file sharing Eze Castle Integration offers the Varonis' DatAnywhere product as a standard feature within our Eze Managed Suite. Varonis' DatAnywhere offers users seamless and secure collaboration and file sharing across devices.
Beyond security, Varonis DatAnywhere is easy to use. Users receive the same drag-n-drop experience as shared network drives or a cloud sync folder, which means no need for training on complex user interfaces and collaboration workflows. Additionally, data is automatically backed up and version controlled.
We created a video training series for our Eze Managed Suite clients on using DatAdvantage. While I can’t share all the videos (unless you are an Eze client!), here’s the intro video to give you a taste of this great feature.
Hedge fund outsourcing is not a new trend, as buy-side firms have long dispersed the responsibility of many functions to third-party service providers more adept and accomplished at said functions. Technology, for example, is an area where many firms choose to leverage outsourced providers to manage complete or partial infrastructures, support projects or supplement on-site IT staffs. The benefits to outsourcing are numerous, but the true measure of a successful service provider relationship comes when an investment firm’s level of risk in using that provider is low.
Risks are everywhere, particularly in today’s cyber-focused environment. But the risk a hedge fund undertakes when outsourcing a function of its business to a third-party is enormous. Not only is the firm relinquishing control to an outside company, it also takes on the added burden of managing that company, in addition to its own.
It’s one thing to put faith in your service providers to do their jobs effectively. It’s another to ignore your own firm’s responsibility to manage that third party as a means of protecting your own firm. Successfully managing risk associated with third-party service provider relationships is a full-time job, especially for financial services firms working with dozens of various parties. Here are a few tips to help your firm properly manage third-party service provider risk:
We take great pride in helping solve our clients' IT needs and highlighting recent success stories. Our client Wexford Capital LP is one such example who selected the Eze Private Cloud platform for its fully managed, enterprise-grade environment. Wexford Capital gravitated away from its on-premise IT infrastructure and towards the Eze Private Cloud for its multifaceted suite of services and measurable benefits, such as, cost optimization and increased business agility.
Dante Domenichelli, Chief Operating Officer at Wexford Capital, said, “Eze Castle Integration delivers the comprehensive services and expert, reliable support we had been searching for in an IT provider. Transitioning to the Eze Private Cloud has enabled seamless business expansion and improved our operational efficiencies while providing assurances of performance and security.