We recently hosted a panel at the Hilton New York to talk about some of the key challenges facing hedge funds today, as well as current trends in hedge fund technology.
Panelists included: Vinod Paul, Managing Director at Eze Castle Integration, Anurag Bhardwaj, Head of Strategic Consulting at Barclays Capital, and Vishnu Varma, Chief Technology Officer at Tiger Global Management.
Below is a summary of some of the key topics discussed at our recent seminar:
Hedge Fund Market Trends & Challenges
It’s been an interesting year thus far for hedge funds and other alternative investment firms, as inflows have been high but performance low. In addition to performance challenges, hedge funds continue to deal with increased competition for investments, and thus asset-raising remains a hurdle for many funds – regardless of their size or strategy.
Similar to 2010, this year has brought an influx of new hedge fund start-ups, though many are smaller than typically seen in previous years. Managed account structures are gaining popularity. New strategies are being utilized, such as emerging markets or quant funds, but long/short equity remains the most popular strategy among new launches.
One of the biggest challenges facing hedge funds today is the uncertainty surrounding regulations such as Dodd-Frank. The SEC has extended the deadline for hedge fund registration until March 30, 2012, but many firms are unsure of the specific requirements they must meet.
In addition to increasing legal requirements, investors are also demanding a lot from hedge fund managers today. In terms of technology, investors want to see disaster recovery and business continuity plans in place in order to ensure there are adequate back-up plans if something goes wrong.
The role of the technology service provider is changing accordingly with these new investor requirements. IT providers are not just keeping the lights on anymore. Drawings and spreadsheets are no longer sufficient to present to investors. These days, service providers are being pulled directly into investor due diligence meetings to explain the intricacies of a hedge fund’s technology infrastructure.
Cloud Computing & Hedge Fund Technology Trends
By far the biggest trend in the hedge fund technology space today is cloud computing. Although the technology itself has been around for some time, hedge fund managers and investors alike are now embracing the cloud, and its prevalence is being seen throughout the industry. Education is the key when it comes to the cloud. Fund managers should educate themselves about the benefits and challenges – even something as seemingly simple as the distinction between public and private clouds.
Expectations are that the cloud is not just a passing trend but a significant wave that will continue to gain popularity throughout the hedge fund industry, particularly given its cost benefits and proclivity for flexibility and scalability.