We are excited to debut our newest video that explains why the network powering a cloud service matters and should be evaluated closely.
As background for why we created this video, in today’s interconnected financial world, investment firms have global interests and a global presence, making fully on-premise IT infrastructure a way of the past. Cloud service providers have a variety of capabilities, each designed to serve a specific set of needs, which makes it crucial for businesses to critically evaluate the network behind a cloud and what it can deliver. Not all clouds are created equal.
Our ECI Link Financial Network is a global private cloud network built for the financial industry. With data centers in the US, UK and Asia, it enables organizations to efficiently leverage a single provider for all their global infrastructure needs.
Now on to the video -- let us show you why ECI Link is THE single converged network built to power today’s buy-side firms' trading operations.
We continue to speak with clients and prospects on a regular basis on the topic of cybersecurity, and with the expectation that the SEC will start security exams sometime around September, it’s evident that firms are working diligently to answer the questionnaire and shore up internal practices.
To continue fostering education around this topic, we hosted two events last week dedicated to cybersecurity for hedge funds and investment firms. For your convenience, you can read a brief recap of some of the key topics discussed or scroll down to watch our full webinar replay.
Cybersecurity a Hot Topic on State & Federal Level
By now, we all know the SEC has taken steps to assure that hedge funds and investment advisers put security mechanisms and practices in place to protect against cyber threats. SEC Commissioner Luis Aguilar said there is “substantial risk that a cyber-attack could cause significant and wide-ranging market disruptions and investor harm.” Even beyond the federal level, some states are chiming in on the cybersecurity front. Earlier this month, Massachusetts and Illinois acknowledged that they were polling investment advisers about their security practices, and that based on responses, state regulations could be impacted.
Categorized under: Launching A Hedge Fund Security Hedge Fund Due Diligence Hedge Fund Operations Hedge Fund Regulation Infrastructure Communications Outsourcing Business Continuity Planning Trends We're Seeing Videos And Infographics
Timing is everything. Last week we released a new whitepaper, Why the Billion Dollar Club is Headed to the Cloud, and shared an excerpt here on Hedge IT about why hedge funds are making this move. Today, to entice you to download the full paper, we'll share WHEN firms are making the cloud move.
For newly emerging investment firms, the choice to adopt a cloud-based architecture is an easy one. Few firms have a business model where an in-house Comm. Room makes strategic or economic sense. But what about established firms that have been in business for several years and have invested millions of dollars in infrastructure? When is the right time to make a move?
Opportunities and timing will vary, but generally speaking, the following three scenarios represent ideal inflection points for moving to the cloud:
This is an ideal time to switch to the cloud. Many companies are understandably reluctant to take on the expense of moving a massive, expensive, and often outdated infrastructure to a new location – particularly if the company expects to phase out certain portions or components in the following 24-36 months. In such cases, migrating to the cloud before relocating offices can be a smart move.
In Part 1 of our Transformation of IT seminar recap, we shared what our expert panel discussed relative to evaluating outsourced solutions and leveraging technology solutions. Our panel included Vinod Paul, Managing Director, and Steve Schoener, Vice President, at Eze Castle Integration, John Budzyna, Managing Director, and Dave Messier, Director, at KPMG, Timothy Ng, Managing Principal at Clearbrook Global Services, Jon Anderson, Global Head of OTC Derivatives at SS&C GlobeOp and Sheldon Rubin, COO/CFO/CCO at S Squared Technology LLC.
Read on to see what our speakers had to say about the considerations for outsourcing, typical transformation challenges and more. You can also read Part 1 of the event recap or listen to the complete audio replay.
Q: Whether it's technology, compliance or another area of the business, firms ultimately need to decide if they are going to manage these areas internally or outsource to an expert vendor. How does a hedge fund determine what is the right solution for them and whether to outsource or maintain their own systems and operations?
When considering internal operations vs. outsourcing, a firm must determine which option gives it the most control over the given process. The firm is not only considering outsourcing technology but also outsourcing control.
The following article is part of our Emerging Managers Insight Article Series. Read more articles from the Series HERE.
What are the keys to starting a hedge fund? How does an emerging manager ensure success in a constantly-changing world of legal and regulatory guidelines, increasing investor expectations and evolving technology platforms?
In order to answer these questions, Asset TV and the Hedge Fund Association recently gathered an expert panel for a video roundtable focused on hedge fund startups. Our own Managing Director, Vinod Paul, was featured on the panel, along with experts from The Kingdom Trust Company, Eisner Amper LLP, and Thompson Hine LLP. Watch the video below to learn more about a variety of topics important to new fund launches, including:
Technology Infrastructure Priorities
Dodd-Frank & Regulatory Requirements
The following article is part of our Emerging Managers Insight Article Series and was contributed by CFS Group. Read more articles from the Series HERE.
There are many layers to creating a successful launch of a hedge fund, and often one that is overlooked is implementing the right furniture, while keeping in mind budget, timeline and dimensional restraints for your new office space. For someone starting a fund, and relying on your own capital, creating an office space within a budget is essential. In order to do so, you must partner with a furniture dealership that understands the marketplace and has the creativity to provide a solution that is light on the wallet but has the feel of stability and success.
As you would expect, just like many other businesses, the commercial furniture industry is a very competitive, relationship-driven sale, and unfortunately the client is usually on the raw end of the stick. Let’s give an example:
Hedge fund A has six traders, and in their mind “we need a trading desk.” But the fund's users only have one PC and two monitors each, which equates to a minimal technology requirement. The fact is that a full-blown trading desk can range from $2,000 to $5,000 (for height adjustable product) per user.
Here is what the fund manager needs to know. There are other options that will adequately handle your technology, save you up to 60-70% and give you the look and feel of a trading desk solution - savings of $10,000 just by having the proper relationship and information.
The following article is part of our Emerging Managers Insight Article Series and was contributed by Wells Fargo Global Fund Services. Read more articles from the Series HERE.
Traditionally, for most investors, the main concern when investing in a hedge or private equity fund was whether the manager could generate a sufficient level of return for an acceptable level of investment risk.
But operational matters have increased in importance and operational due diligence has now evolved to the point that many investors will reconsider an investment on operational grounds alone, regardless of the return profile.
Operational risk can take many forms, but valuation is a good place for investors’ initial focus: are the holdings of the fund accurately valued, and is there a process in place to ensure that they are accurately valued at each dealing period?
Valuation risk is particularly critical for more complex strategies, such as structured credit, where the risk of pricing irregularities is significantly higher. However, it is also important to review and understand pricing policies and procedures for strategies that trade listed securities. For example, it is useful to know whether the manager marks their equity longs at the bid, mid or close and, if it is the mid, if the manager determines the impact on the portfolio if priced at the bid.It is also important to understand if adjustments are made for large positions, less liquid holdings, or for securities that trade less frequently.
How the holdings of a fund are valued is important for many reasons: it drives the net asset value (NAV); it sets the price for subscriptions and redemptions; and it determines the level of performance fees. While this point may be obvious for most investors, many investors are often unsure of what detailed valuation related questions to ask the manager and, equally as important, the administrator who is responsible for producing the NAV.
Categorized under: Launching A Hedge Fund
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
Here 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
On 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”).
The 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
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:
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:
Reporting requirement, and
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