The following article is part of our Hedge Fund Insiders Article Series and was contributed by CBRE Group, Inc. Read more articles from the Series HERE.
As a team focused exclusively on advising hedge funds on their strategic real estate planning, we have observed several trends continuing to proliferate in the market. Below are three real estate-related issues relevant to all hedge funds.
Increasing Construction Costs
Construction costs for office interiors throughout New York City are rapidly increasing and firms that built space 5–10 years ago will find that overall expenditures for the same quality installation have increased 30–40% based on benchmark construction cost data across NYC. Although benchmarking numbers are not available specifically for hedge fund construction, high-end design details like custom millwork and architectural metal and glass are often a significant part of the design and are seeing the most rapid appreciation in cost, driving even more significant increases specific to hedge funds. Additionally, these premium and other critical trades such as HVAC and electrical are in high demand and can cause scheduling delays, pushing associated costs higher than ever.
It is crucial for hedge funds to have an owner’s rep / project manager advisor involved to ensure projects are appropriately budgeted from the initial due diligence phase, assessed on a project-by-project basis throughout the site selection process, and effectively implemented during the design and construction of the selected space.
It’s been quite a year, and as always, it’s hard to believe it’s over. In 2014, Hedge IT continued to thrive in its goal to provide advice and insight into hedge fund technology and operations. The financial services industry is evolving at a rapid pace, and we’re evolving our topics and conversations to keep up. Across 100 blog posts this year (not including this one), almost half of them – 49 to be exact – addressed the topic of security, which is undoubtedly one of the single most important focus areas for hedge funds and investment firms today. In addition to security, we covered everything from tips for starting a hedge fund to avoiding cloud mistakes to hiring for IT roles.
Looking ahead to 2015, we plan to keep the conversations tuned in to what really matters to hedge funds when it comes to technology, and we’ll share as much content as we can in as many formats as we can. But before we get too ahead of ourselves – it’s not quite 2015 yet – let’s take a look back at 10 of our most popular blog posts from 2014.
We’ve tapped the expertise of nine experts in the hedge fund startup space to share their thoughts on a range of topics specific to emerging hedge fund managers. Below are some highlights, and you can read the entire Emerging Managers Insight Series eBook here.
Set a realistic schedule to launch and don’t rush to get the hedge 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 as you grow.
Budget for a marketer in your first two years of operation. If you look at the largest funds in the industry, they all have substantial investor relations teams that keep current investors informed while prospecting for future investors.
Capital introduction is a much sought after service from prime brokers which can be very helpful in providing a new hedge fund exposure to potential investors. Take advantage of introductions and begin to build relationships with potential investors.
Voice over IP has come a long way especially in the business world, but many investment firms still have hesitations about making the switch. In honor of our recently enhanced Eze Voice service, which runs over the Eze Private Cloud Network, we decided to tackle five common myths about Voice over IP.
MYTH 1: Poor Call Quality – Everyone will know I’m on VoIP
Call quality is a key concern and can be impacted by a number of items including the network, available bandwidth and even the type of phones being used. However, a well-designed business-caliber VoIP system can deliver quality of service comparable to an in-house phone system. In business settings, where calls are made over private IP connections, Quality of Service (QoS) can be monitored and guaranteed because the entire IP connection is controlled by the party making the call.
When evaluating VoIP services, it is important to inquire about the underlying network and how voice traffic is prioritized and routed. You want a provider that has full control over network traffic and can ensure high quality of service. For added confidence, ask to speak with existing VoIP customers (over the phone!) to hear about their experiences first-hand.
MYTH 2: VoIP is Unreliable – I’ll Experience Downtime
A natural extension of the call quality concern is the reliability concern. While consumer-grade VoIP services work over the Internet to deliver low cost services, Business-grade VoIP services often use the Internet as a backup and have private IP point-to-point lines for primary connections. If Internet is the primary transit, be sure you are working with a VoIP provider who manages the entire network and has control over traffic prioritization. In most cases you want to ensure voice traffic takes precedent over data or travels on a different network.
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.
What comes to mind when you think of Miami, Florida?
Beaches and sun, exciting nightlife, a popular Will Smith song. These are typical associations with Miami. How about finance? This might not be the first thought that comes to mind, but the city of Miami is hoping that will change. Miami is a major financial hub and growing, and according to the president of the Miami Finance Forum, it’s the second most concentrated financial hub behind New York City.
Currently home to over 60 international banks and 100 alternative investment companies, Miami and its busy Brickell Avenue has emerged as “Wall Street South,” and according to Forbes is luring many financial firms away from more traditional hubs such as New York and Greenwich, CT.
In the past on Hedge IT, we have focused on the real estate markets in both the US and UK. Today, we move across the pond and provide an update on Hong Kong.
Asia has experienced unprecedented growth in its hedge fund industry, especially Hong Kong, despite difficulties in recent global financial markets. However, office space in Hong Kong is still undeniably the most expensive in the world.
Hong Kong’s Central District is a bustling location with gleaming skyscrapers and is home to about 90% of Hong Kong hedge fund offices. According to CBRE Global Research and Consulting’s 2013 Prime Office Occupancy Costs survey, the Central District’s overall occupancy costs of US$235.23 per sq. ft. per year topped the list as most expensive for the third consecutive time. London’s West End followed with total occupancy costs of US$222.58, and New York’s Midtown Manhattan ranked 10th on the list with occupancy costs of US$120.65.
Categorized under: Real Estate
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.
Tomorrow, we are co-hosting an exciting seminar in New York City with our friends at KPMG on the topic of launching a hedge fund. The half-day event, Hedge Fund Launch 2.0: Navigating the New Environment, will feature expert panel sessions on variety of topics including technology, regulations, capital raising, application platforms and more.
One panel we’re particularly interested in – beyond the technology panels, of course – is Corporate Essentials, a program focused on the often forgotten-about aspects of launching a new business. These aspects include human resources, compensation, insurance and real estate. Here’s a sneak peek at some of the content our panelists will be discussing at tomorrow’s event: