We spend a lot of time here on Hedge IT making suggestions about what hedge funds and investment firms should do when it comes to their technology. But today, we’re not going to tell you what you should do. In fact, these are things we definitely DON’T want you to do!
Plan your infrastructure only for the short-term.
A crucial mistake often made by funds is not planning for the future. Even at launch, you should be thinking about what your firm will look like and what technology you will require down the road. Planning out two to three years in advance is recommended in order to reap the most benefits when it comes to your infrastructure. Plus, if you don’t plan ahead, you may wind up incurring more costs if technology decisions need to be made unexpectedly.
Ignore the importance of a business continuity plan.
It has become commonplace for hedge funds to employ disaster recovery strategies to protect mission-critical data and applications (due to a number of reasons including investor expectations, new regulations and the effect of unexpected natural disasters, e.g. Hurricane Sandy). But firms often overlook the equally important business continuity plan, which provides guidelines for what employees need to do in the event of a disaster. Yes, focusing on your infrastructure is essential to keeping your business afloat, but that business also cannot survive without its employees. Don’t forget to test that BCP plan once you’ve developed it – a good plan will only work if people know how to follow it.
Big changes are coming in the form of European Union data protection mandates. In January 2012, the European Commission announced a proposal to reform the current European Union's data protection framework, currently known as the 1995 EU Data Protection Directive, to better protect the personal data of EU citizens and update the current legislation to fit in with the 21st century requirements and rapid evolution of technology (including the prevalence of social networking and smartphones).
The EU proposal will give individuals more control over their data while also serving to promote the importance of data protection in a globalised world. The European Commission expects the rules will go into effect two years after they have been adopted by the member countries - officially around 2014 or 2015.
While some of the current proposals will undoubtedly be amended over the course of this lengthy process, let’s look at some of the practical steps companies should be considering now.
Yesterday, we hosted a webinar, “Going Social: What Investment Firms Need to Know about Social Media Compliance” along with Global Relay, an Eze Castle Integration partner and provider of enterprise message archiving and monitoring services. Global Relay's vice president of sales, Bryan Young, and our own vice president of marketing, Mary Beth Hamilton, discussed a range of topics including the changing SEC guidance on social media, compliance requirements for hedge funds and key components of instituting a social media policy at an investment management firm. Read on for a recap of the event, or watch the full replay now.
In the wake of the 2008 financial credit crisis, investment firms have recognized the need for more robust liquidity risk management tools and procedures. However, due to shifting regulations and detailed fund and investment structures, fund of funds, private equity firms, hedge funds, and institutional investors continue to grapple with liquidity management and reporting within their investment portfolios. The following is a high level overview of both the liquidity risk challenges facing firms today, and the ways in which some fund managers are overcoming these challenges.
What is liquidity risk, and how does it affect funds?
Liquidity is the extent to which an asset or security can be bought or sold in the market, while not impacting the asset’s price. The concept of liquidity is comprised of illiquid assets, which are the result of liquidity risk and cannot be instantly sold due to value uncertainty and lack of a market. Liquidity risk refers to the concept that an asset or security cannot be traded at the rate necessary to achieve returns and bypass losses. In the last several years, worldwide economic challenges including rising liquidity costs, a more uncertain market and lower levels of market assurance have contributed to the liquidity management challenges facing funds. Liquidity risk’s ability to negatively impact and compound other types of risk, such as credit risk, also has far reaching consequences for the financial markets. These consequences make it even more imperative for firms to get a handle on their liquidity risk management practices.
Historically, financial services firms have not been the most active group in the social media sphere. In a 2011 survey of hedge fund managers conducted by MHP Communications, only 1% of firms were active participants on Twitter, and none of the managers surveyed were active on Facebook. More recently, however, the tides have begun to change. Following Goldman Sachs’ entrance into the Twitterverse in May 2012, investment management firms and their employees have started to increase their social media participation. With this growing trend comes the added layer of social media compliance with industry legislation.
The Legal Perspective
According to the SEC’s Rule 17a-4(b), registered investment advisers and broker-dealers should archive all business communications on social media for a minimum of three years. As the frequency of discovery audits continues to rise, firms should ensure these communications are easily searchable and can be recovered quickly in the event of an SEC inquiry.
Today, we're excited be hosting the 2013 London Hedge Fund Cloud Summit at the Prince Philip House in London. The event features a variety of industry experts participating in thought-provoking panel disccussions focused on the cloud adoption trends shaping the investment industry. Conversations will touch on everything from the differences between public and private clouds to cloud security and application hosting.
In honor of this event and to provide a visual to help encapsulate the many benefits that come from leveraging a private cloud, we have published a new infographic entitled “You Might be a Private Cloud User If…” Check it out to see the top 10 signs that you are likely a private cloud user. For more information and details on the 2013 London Hedge Fund Cloud Summit please visit the event page. Also, be sure to look out for a recap of the event here on the Hedge IT blog next week!
Last week, we hosted a webinar covering AIFMD’s impact on US based hedge funds. The event featured Bill Prew, Founder of INDOS Financial Limited, and provided a high level overview of the changes that AIFMD will potentially bring to the alternative investment industry. Prew specifically focused on how US based managers will be impacted by this legislation. Read on for a summary of the main topics covered during the event, including an overview of AIFMD and the considerations and upcoming changes for US managers.
About the Expert
Bill Prew is the founder of INDOS Financial Limited. Before founding INDOS, he was the chief operating officer at James Caird Asset Management, a hedge fund with offices in London and New York. He has also served in various senior roles at Barclays Global Investors and PricewaterhouseCoopers. Following a summary of the information presented by Mr. Prew during our recent webinar.
This fall, Microsoft’s new Windows 8 operating system captured the attention of many customers. Windows 8, however, isn’t the only Microsoft change 2013 will bring. Microsoft is planning to provide stricter oversight of its auditing process by conducting up to 30,000 licensing audits on small to midsize companies by 2014. Here is an overview of why you should ensure that your software is up to date and what to expect when it comes to the Microsoft licensing audits.
What are the Microsoft Licensing Audits?
In 2013, Microsoft will conduct audits on customers’ software usage. The audits will be mainly focused on mid-size companies with 500 - 2,000 computers. Many large companies have already put strict companywide licensing policies in place, but smaller firms typically have less formalized processes for ensuring all devices are licensed appropriately. As a result, Microsoft’s auditing focus is shifting to smaller companies. These audits will ensure that clients’ software is correctly licensed and paid for.
Last week, we hosted a webinar on the Hedge Fund Industry Outlook for 2013 with speakers Deborah Prutzman, CEO of the Regulatory Fundamentals Group, and Mary Beth Hamilton of Eze Castle Integration. Following is a recap of the key topics discussed around operational due diligence, regulations and technology trends.
Insights from Deborah Prutzman, Regulatory Fundamentals Group
2012 was a year marked with significant regulatory changes in the world of investment management. So far, we’re expecting to see more of the same in 2013. This time, the direction and manner of change will likely be more predictable. Some important themes we expect will permeate throughout the year include:
As 2013 begins, managers of hedge funds and other financial services firms should be aware of upcoming changes within the regulatory environment. Investment firms in the US can expect to be impacted by stricter controls, laws and more detailed investigations imposed by the SEC and other governing agencies. Here’s a high level overview of some of the most important regulations to keep your eye on this year:
The JOBS Act
The Jumpstart Our Business Startups Act, also known as the JOBS Act, was signed into law by President Obama on April 5th, 2012. It’s intended to assist eligible companies in seeking initial public offerings by simplifying the procedure for going public. This legislation eases federal regulations and allows for crowd funding – enabling individuals to become investors. As a result of the JOBS Act, small business startups will be able to collect money from private individuals without making an IPO.
- A Step-By-Step Guide to Dealing with a Security Breach
- The New CIO: From IT Manager to IT Innovator
- New Infographic: Criteria for Evaluating Colocation Providers
- What Not to Do When It Comes to Your IT
- Data Protection Changes Coming to EU Firms
- business continuity planning
- cloud computing
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- disaster recovery
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