It has been said that cyber weapons can be as dangerous as weapons of mass destruction. To emphasize this, at last night’s FBI Citizens Academy seminar on cyber security in financial markets, the speaker noted that if you take out an industry (think financial, teleco) you can cripple an entire country.
But just how would this happen? What’s in a hacker’s tool kit? Quinn Shamblin, executive director of information security at Boston University, provided a glimpse into the cyber security underworld.
Targeting Your Favorite Device
Let’s start with Mobile Device Security. Hackers are shifting their focus and resources to mobile devices. They recognize that a user’s life is virtually encapsulated on his/her mobile device. From contacts and email to documents, passwords and banking apps, mobile devices now hold as much as or more personal information than PCs or laptops. And most devices do not have anti-virus/malware software installed.
Just last Friday, Apple released a critical update to its iOS 7 operating system after a flaw was identified that could give an attacker with a privileged network position the ability to capture or modify data in sessions protected by SSL/TLS (aka public key encryption). Following that announcement, researchers at a cyber security firm (FireEye) published a proof of concept for a surveillance app that, if created and distributed by hackers, could capture every tap on an iPhone’s screen. The information captured, including passwords and credit card numbers, would be accessible to the attacker. These are just two examples of the cyber security threats facing mobile devices. Users need to be aware that these threats exist and practice smart computing on all devices.
The results from our Global Hedge Fund Technology and Operations Benchmark Study are in and here is a snapshot of the 2013 findings. You can find the complete report here. We surveyed 538 buy-side firms across the United States, UK and Asia in order to discover their front, middle, and back office technology and application preferences.
All survey respondents fell into the following categories within the financial industry: hedge fund (60%), asset/investment manager (13%), private equity firm (8%), fund of hedge fund (5%), non-financial firm (5%), advisory firm (1%), broker dealer (1%), venture capital firm (1%), quant fund (1%), or ‘other’ (3%).
The firms resided in three different asset classes: 30 percent reported their AUM as $100 million and under; 32 percent fell between $101 and $500 million; and 38 percent reported over $500 million in assets under management.
In regards to investment strategy, long/short equity continues to dominate as the most favorable with 45 percent of respondents reporting this to be their primary investment strategy. Other preferred strategies include fixed income (8%), credit (7%), global macro (6%), emerging markets (6%), distressed debt (5%), and event driven (4%). The top prime brokers employed by firms in 2013 are Goldman Sachs, Morgan Stanley, Credit Suisse, JP Morgan and UBS (same as last year).
Now let's look at front, middle and back office applications most commonly used at hedge funds.
Yesterday marked exactly five years since the infamous Bernie Madoff was arrested for executing the largest Ponzi scheme in U.S. history. As a result, Wall Street and the investment community has undergone a plethora of changes designed to avoid such scandals in the future. Let’s take a look at the lasting impact of Madoff and what changes we can still expect to see in the future.
Unless you’ve been living under a cave for the last several years, you’ve heard the name Bernie Madoff and understand its association with all things negative: scandal, fraud and disgrace. The former NASDAQ chairman and founder of Bernard L. Madoff Investment Securities LLC (BLMIS) swindled billions of dollars and affected more than 12,000 investors, faking investment returns over the course of multiple years.
Amidst the nation’s most serious financial crisis since the Great Depression, we all learned of Madoff’s devastating scheme. He eventually turned himself in at the urging of his sons and is currently serving 150 years in federal prison for his crimes.
As we look forward to 2014, we can expect that the hedge fund and investment management industry will continue to evolve and experience change as in years past. As more and more new funds launch, the competition for investors will increase and firms will be hard-pressed to live up to the successes of the top performing funds in the industry.
Earlier this week, we gathered several panels of experts in Boston to share their insights into the hedge fund landscape for startups in 2014 and the tips and advice for firms looking to compete in the changing marketplace. Following is a brief recap of the event.
Building a Hedge Fund is Like Building Any Successful Business
When starting a new firm, it’s critical to think about all aspects or forming a new business. Yes, your investment strategy is important, but if the foundation of your business is not critically thought out, it will wreak havoc for your firm. Following are a few areas you shouldn’t overlook as you go through the launch process.
Categorized under: Business Continuity Planning Cloud Computing Hedge Fund Due Diligence Hedge Fund Operations Hedge Fund Regulation Infrastructure Launching A Hedge Fund Outsourcing Security Trends We're Seeing
Like David bravely dueling with the larger Goliath, small and mid-sized investment firms are often faced with insurmountable odds when competing against larger (and better endowed) funds. With more experience and more assets, larger firms have the advantage when it comes to soliciting investor allocations. But do these inherent shortcomings equal certain failure? If David can emerge victorious, can’t smaller hedge funds?
Earlier this week, we gathered a panel of experts in San Francisco to discuss this topic at length. Following is a brief synopsis of the topics they covered.
While it’s not the sexiest aspect of a hedge fund’s operations, a firm’s technology infrastructure is critical to its success. But a major consideration lies in choosing what type of infrastructure to use, and accordingly, where to host it.
Earlier today, we picked the brain of our Vice President of Client Technology, Steve Schoener, and asked him to share his expertise on the key drivers for firms migrating to the cloud. He also shared two examples of clients who’ve successfully transitioned to the cloud for various reasons. Below is a short recap of Steve’s presentation.
Would you rather watch the full replay? Scroll down or click here.
As you know, we encourage our clients to regularly test their disaster recovery systems (at least twice a year!). But believe it or not, there is actually an even better preparation for a DR situation - a planned activation.
In recent years, Eze Castle has seen a large increase in requests for planned activations. Why? A few notable reasons include:
Investor due diligence requests
A desire for more comprehensive scenario-testing
“But isn’t a planned activation the same thing as a DR test?”
We hosted a webinar earlier this week, App Hosting 101: Managing Your Essential Applications in the Cloud, in which Steve Schoener, Eze Castle Integration’s Vice President of Client Technology, and Martin Sreba, Senior Director at Advent Software, discussed topics such as industry trends in application hosting, key drivers of application solutions, common myths about the cloud, and the right time to put an application into effect. Continue reading for an overview of the webinar.
Industry Update: What’s Going On?
Increasing demands from hedge funds’ current and target investors are driving a variety of trends. Due diligence requirements are more advanced, as investors expect to see candid looks into a fund’s systems, disaster recovery capabilities and more. The increasing complexity of investments is also driving the need for more complex systems to handle these instruments.
Firms are starting smaller in today’s environment, with many starting with under $100mm in assets under management. Startup funds are looking for technology solutions to complement their size and give them the tools to efficiently run their businesses.
We were recently asked by a COOConnect member about the best sources for information about the strengths/weaknesses of the various hedge fund applications including front, middle and back office. Since we know many folks have this same question, today we are going to expand on the answer given by our expert, Mark Coriaty.
Now the way a hedge fund uses an application will vary based on its investment strategy, and therefore the perceived strengths and weaknesses may vary as well. However, there are multiple ways to establish a baseline of strengths and weaknesses.
Service Provider Reports: Balancing Bias with Value
First up are free reports from hedge fund service providers such as Eze Castle Integration. Each year we publish a benchmark study that outlines top applications used in select front, middle and back office categories by hedge funds. This report will provide a baseline of the top three application vendors used in each category, but doesn’t dive into specific feature sets. The report can be downloaded HERE.
Vendor reports can be helpful in getting an initial understanding of the most frequently used applications and top features used by firms. You should always consider the source, as some vendor reports or whitepapers will be biased.
It is becoming cliché to say, but the investor due diligence process has truly evolved from a ‘check the box’ activity to a detailed and analytical process. Today, hedge fund investors want to see a tested investment strategy coupled with institutional-grade business processes.
Here at Eze Castle Integration, each year we help more and more hedge fund clients complete the Technology portion of investor due diligence questionnaires (DDQ). So we thought it would be helpful to share some of the more common technology related questions we are seeing. Not surprisingly you’ll see security and disaster recovery questions on the list.
As you consider your responses to these questions, keep in mind that in some cases investors are more concerned with your decision process as opposed to seeing the “right” answer. The reality is that often the “right” answer varies from firm to firm and depends on a number of factors, including investment strategy.