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A Hedge Fund’s Guide to Technology Decisions: From Cloud to DR to Security

By Mary Beth Hamilton,
Thursday, April 17th, 2014

As part of our Emerging Managers Article Series, today’s article looks at technology considerations for launching a hedge fund. The technology landscape is changing quickly, especially with the adoption of cloud services and the heightened regulatory focus on cybersecurity. So we’ll dive into these two topics as well as touch on preparing for the inevitable disaster and common technology mistakes to avoid. Read more articles from the Series HERE.

The Cloud: Every Hedge Fund is Doing It

Cloud computing at hedge fundsHere at Eze Castle Integration, we see that 9 out of 10 hedge fund startups are selecting a cloud-based solution versus a traditional on-premise solution. If you aren’t already sold on the cloud, here are a few reasons we typically see clients select the cloud:

  • Easy and Complete IT Package: Cloud computing can support front-, middle- and back-office functions – everything from business applications and client relationship management systems to data management solutions and accounting systems

  • Cost Containment: CapEx to OpEx: While building out a Comm. room or data center requires capital expenditures, using an external cloud service that offers a pay-as-you-go service falls into ongoing operating expenditures. The transition to a cloud service provides many cost-savings beyond just eliminating the need to purchase and refresh equipment.

  • Improved Flexibility and Scalability of IT: Cloud computing is uniquely flexible and scalable, operating on a utility basis - allowing firms to pay as they go and only for the resources they will use.

  • Simplified IT Management = Less Maintenance: With cloud services, firms no longer need to handle server updates, patches, hardware installs and other computing maintenance issues. This saves firms from having to hire dedicated IT resources or allows them to focus IT staff on higher value projects. 

Meeting the SEC's Cybersecurity Expectations

Regardless of whether your firm opts for an on-premise solution or the cloud, security is fundamental when considering a fund’s technology setup and network infrastructure. It is so important that the SEC this month issued a risk alert providing additional clarity into how it will examine registered investment firms regarding their cybersecurity practices (Download the sample SEC security questions here.).

Categorized under: Launching A Hedge Fund 



Assessing Never-Examined SEC-Registered Investment Advisers: An SEC NEP Priority

By Shelley Rosensweig and Beth Smigel, Tannenbaum Helpern Syracuse & Hirschtritt,
Tuesday, April 15th, 2014

Shelley RosensweigOn January 9, 2014, the Office of Compliance Inspections and Examinations (“OCIE”) of the Securities and Exchange Commission (the “SEC”) published its 2014 examination priorities for its National Exam Program (“NEP”).   While the examination priorities include multiple areas that OCIE believes are higher-risk areas of the business and operations of investment advisers, this article focuses on the NEP’s initiative (the “Initiative”) to conduct focused, risk-based examinations of investment advisers who have been registered with the SEC for at least three (3) years (including non-U.S. advisers) but have not yet been examined by the NEP and are not subject to the “Presence Exam” initiative discussed herein (“Covered Advisers”). 

Beth SmigelThe examinations conducted by the NEP in accordance with the Initiative focus on two approaches.  The first approach consists of risk-assessment reviews which allow the NEP to obtain a better understanding of each Covered Adviser and include a high-level review of the Covered Adviser’s overall business activities, with a particular focus on the compliance program and other essential documents needed to assess the representations made on the Covered Adviser’s disclosure documents.  The second approach utilizes focused reviews which emphasize certain high risk areas of the Covered Adviser’s business and operations, including the following:

  • Compliance Program: NEP staff will examine the Covered Adviser’s compliance program and the effectiveness of such program (including a review of its books and records, even such records existing prior to such Covered Adviser’s registration with the SEC) to determine if a Covered Adviser has adequately identified conflicts of interest and compliance-related risks, adopted appropriate policies and procedures to mitigate and manage those conflicts and risks, and empowered a competent chief compliance officer to administer the compliance program;

Categorized under: Launching A Hedge Fund 



Should I Go With the Flow Into Liquid Alts? (Emerging Managers Part Two)

By Frank Attalla, CPA, and Marc J. Wolf, CPA, Rothstein Kass,
Thursday, April 10th, 2014

The following article is part of our Emerging Managers Insight Article Series and was contributed by Rothstein Kass. Read more articles from the Series HERE.

In Part One of Rothstein Kass’ Should I Go With the Flow Into Liquid Alts? Critical Questions for Alternative Managers Weighing a Move Into the Retail Space, we examined five key questions and critical considerations to help guide alternative investment managers through the decision-making process when weighing a move into the growing liquid alternatives market, including:

  • Emerging Managers Articles Series

    Will a registered product cannibalize my existing private fund business?

  • Will my strategy fit inside a mutual fund?

  • Do I understand the distribution landscape?

  • Should I use a stand-alone trust or a series trust? If a series trust, how do I choose the right one?

  • Is a registered fund too expensive? 

In Part Two, we conclude our examination of several other key questions and considerations.
 
6. Do I understand all my product options?
 
All registered funds are not created equal. There are many different varieties of mutual funds and closed-end funds, each with different:

  • Tax considerations,

  • Reporting requirement, and

  • Fee structures.

Managers should have an understanding of all the options and determine what works best for their strategy and their business.

Categorized under: Launching A Hedge Fund 



Should I Go With the Flow Into Liquid Alts? Critical Questions for Alternative Managers – Part One

By Frank Attalla, CPA, and Marc J. Wolf, CPA, Rothstein Kass,
Tuesday, April 8th, 2014

This week for our Emerging Managers Article Insight Series we have an article published by the Rothstein Kass Institute, the firm’s industry think tank, which outlines a set of important questions alternative investment managers should ask themselves if they’re weighing a move into the growing liquid alternatives market. The article, which will be presented in two parts, offers insights that can help managers determine whether a registered product is right for them, and provides tips on how to best implement their strategy if they decide to make the move. Read more articles from the Series HERE.

Articles for Hedge Fund ManagersAs regulatory requirements become more complex and onerous in the alternative investment space, there is clearly an evolution taking place in the market. There is an ongoing trend toward adding registered or retail products among many hedge fund managers. They are seeking new structures to bring their strategies to market while putting themselves in the best position to tap retail investors and wealth advisors in the new competitive landscape.
 
It’s no secret that a significant amount of capital is looking to move into the alternative investment space – just look at the numbers. According to Citigroup, assets in liquid alternative funds have surged from $95 billion in 2008 to more than $300 billion last year. Citi estimates that number will hit $1 trillion by 2017.
 
If you look at the trajectory, what seems to be clear is that liquid alternatives are here to stay. What may not be so obvious to some alternative managers is whether they should stay on the private fund side or follow the asset flow into the retail space by adding additional product offerings. It’s not a move that should be taken lightly.
 
Managers have to make smart, informed decisions about whether a registered product is right for them, and how they can best implement the strategy if they decide to make the move. There are many questions that need to be answered, and many options that need to be considered before making such a critical decision.
 
To help managers make more informed decisions in the new liquid alternatives reality, Rothstein Kass has compiled a set of important questions managers must ask themselves, and other critical considerations that should be part of their decision-making process.

Categorized under: Launching A Hedge Fund 



The Prime Brokerage Perspective for Emerging Hedge Fund Managers

By Glen Dailey, Jefferies & Company, Inc.,
Thursday, April 3rd, 2014

The following article is part of our Emerging Managers Insight Article Series and was contributed by Glen Dailey, Managing Director, Jefferies & Company, Inc. Read more articles from the Series HERE.

Glen Dailey, Emerging Manager Article Contributor

Starting a hedge fund is easier than ever with many vendors offering turnkey services to get a fund up and running quickly. The challenge is starting a successful hedge fund that will grow and become a viable organization. With over 8,000 hedge funds operating around the world, the competition to attract hedge fund investors is greater than ever. For someone starting a fund, you have to rely on your own capital and that of your friends and family to get the fund off the ground. From there, the key to success is outstanding performance.
 
Someone starting a fund should set a realistic schedule to launch and not rush to get the fund up and running too quickly. Take the time to partner with the right service providers that will support your business from the start and be there as you grow. Have a plan going into your new venture, which should include lining up friends and family as day one investors as well as reaching out to other investors to start a pipeline before you actually launch the fund. Once you are under way, you will end up getting tied to your screens, focused on performing, and time for marketing becomes scarce.

Categorized under: Launching A Hedge Fund 



Unveiling our Emerging Managers Insight Article Series

By Mary Beth Hamilton,
Tuesday, April 1st, 2014

Emerging Hedge Fund Manager Article SeriesThe start-up environment for hedge fund firms continues to evolve as managers face changing investor and regulator expectations, increased due diligence, new investment opportunities and advancing technology innovations.

To help firms navigate the new launch environment, Eze Castle Integration is excited to launch today our Emerging Managers Insight Article Series. The Series, created for emerging hedge fund managers, brings together expert guidance from industry insiders across prime brokerage, legal and compliance, technology and fund management.

Contributors to the Series include senior leaders at Eze Castle Integration, Jefferies & Company, Rothstein Kass, and Tannenbaum Helpern Syracuse & Hirschtritt LLP.

Here is a sneak peak of some of the articles we will publish each Tuesday and Thursday starting this week:

Categorized under: Launching A Hedge Fund 



Dropbox Alternatives Coming to a Hedge Fund Private Cloud Near You

By Mary Beth Hamilton,
Tuesday, March 4th, 2014

Dropbox Alternative for Hedge FundsIs Dropbox becoming a noun? For the sake of this article, let’s say it is.

With over 200 million users, Dropbox (and similar services) is gaining popularity based on its ability to allow users to share files and sync data between devices. These capabilities are very appealing but rely on a public cloud platform that can introduce security and compliance concerns for hedge funds.  

Dropbox made headlines last year when it was discovered by security researchers that the service opens some files once they are uploaded. While Dropbox provided an explanation, this can be a serious issue for businesses where employees are using Dropbox to share sensitive company and investment data.

So are your employees using Dropbox? Probably. A study conducted by Gigaom of 1,300 business professionals found that one out of five use public file sharing services, such as Dropbox, with work documents. And, half of those users know their companies have rules against it. This raises the question, how do you give employees access to a valuable tool in a way that meets compliance and security protection obligations?

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



Three Reasons the Private Cloud is Just like Olympic Curling

By Kaleigh Alessandro,
Thursday, February 20th, 2014

Have you been enamored by the coverage of the Winter Olympics the last two weeks? We sure have. And watching all of these great sports we don’t normally get the chance to witness got us thinking – there are a lot of similarities between technology and Olympic sports. They’re both complex in many ways and require experts (engineers and athletes) who are the best of the best at what they do.Olympic Curling
 
One of our favorite sports to watch is curling. And we couldn’t help but notice that Olympic curling and the private cloud are a lot alike. Don’t believe us? Take a look.

Both are safe and secure.

Let’s be honest: curling clearly presents the least amount of danger and lowest risk for injury at the Winter Olympics. Skiing and snowboarding? We’ve seen our fair share of wipeouts this year. Bobsled, luge and skeleton? Those are terrifying enough just as a spectator. Even figure skating poses a risk when skaters are leaping and twizzling left and right.
 
But curling? Extremely safe. Athletes can be fairly certain – whether they are curling or sweeping – that they will come out of the event unscathed.

Categorized under: Cloud Computing  Launching A Hedge Fund  Security  Outsourcing  Trends We're Seeing 



Five Ways the SEC Will Impact You in 2014

By Deborah Prutzman (Guest Contributor),
Tuesday, January 7th, 2014

Five Ways SEC Will Impact You in 2014This week we have a contributed post from Deborah Prutzman, CEO of The Regulatory Fundamentals Group.

Since the summer of 2012 the SEC has embarked on a drive to change the culture within financial services firms, including those in the alternatives space. At first the SEC focused on education—both of its staff and of industry participants. Now the SEC is actively using enforcement as a hammer to drive deeper change. Enforcement cases in 2013 included a focus on boards that failed to properly steer the valuation process and on individuals who misled compliance, as well as the highly-publicized cases involving insider trading.

What does this mean for you in 2014?

1. The SEC will continue to focus on governance and on gatekeepers. This means you. Whatever your role-- as an adviser, on a board, or as a service provider-- you must have a grasp of key regulatory requirements. The SEC has announced an initiative to bring enforcement actions for inadvertent (or in technical terms “non-scienter”) violations. Do not let your firm be on that list. Take the time to learn what is required of you. Doing otherwise is like crossing the street with your eyes closed. Some may make it across, but do you want to be the one hit by a truck?

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



Best of the Year Blog Posts: 2013 Edition

By Kaleigh Alessandro,
Tuesday, December 31st, 2013

I know, I know, we say it every year. But can you believe another year has come to an end? Even more amazing? We’ve now been bringing you fresh content on Hedge IT for nearly four years – including close to 400 articles! As we look ahead to 2014, we want to extend a huge THANK YOU to our loyal Hedge IT readers and hope you’ll stick around to see what we have up our sleeves in the New Year. Here’s a hint: it may even include a fresh new look...Happy New Year 2014
 
With that said, as we do every year, let’s take a look back at some of our most popular Hedge IT articles from 2013. Here are some of your favorites (and ours, too).

Most Investment Firms Are In the Cloud: Are You?

Back in September, we revealed the results of our 2013 Survey: Examining Cloud Usage within the Investment Management Industry. In conjunction with IDG Research, we surveyed more than 100 financial services firms and found that nearly all of them (87%) are using the cloud in some way. Other key findings included the dominance of the private cloud (74%) and the growing belief that the private cloud is just as secure as an on-premise infrastructure. Read the complete survey report here.

Categorized under: Trends We're Seeing  Business Continuity Planning  Cloud Computing  Disaster Recovery  Hedge Fund Operations  Hedge Fund Regulation  Infrastructure  Launching A Hedge Fund  Outsourcing  Security  Software 



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