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Hedge Fund Transformation, Part 2: Cloud, Communication & Control

By Kaleigh Alessandro | Thursday, June 5th, 2014

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?Hedge Fund Outsourcing

  • 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.

Q: Would you consider outsourcing a cure for uncertainty? Or does it add flexibility in a market swimming in infrastructural, regulatory and technological changes?

  • There is no true cure for uncertainty, but a firm can find economical ways of dealing with uncertainty as it comes. Regulations, for example, can play a part.

Q: Beyond technology, a firm also needs to rely on either in-house or outsourced personnel to take a firm through any of these so-called transformations. Obviously, in order to move from an on-premise technology infrastructure to the cloud, a firm would need to employ an experienced IT staff or leverage a cloud provider to make that migration. What skills and experience are needed for effective hedge fund operations and IT transformation?

  • The short answer is many skills and experiences. Team effort is important. Business skills are also critical: someone who is an expert in underlying business from the top down. That includes the larger perspective as well as intricate levels of detail. Communication is another critical skill.

Q: What are the typical challenges a firm faces while undergoing a transformation? Are there any recommendations you can make about how a firm can effectively navigate the transformation process?

  • Transformation, implementation or change of any kind can be overwhelming. It can be intimidating. One piece of advice is to take a large project and break it down into smaller, more manageable pieces. Firms should also put together a strategic roadmap of where they are and where they want to be. But don’t be married to that roadmap. Understand that things will change and adjustments will need to be made.

  • Another challenge can be overanalyzing problems. Sometimes getting a solution in place and fine tuning later can be more effective than waiting to find the optimal solution while in search of perfection.

Q: What are your final thoughts or forward-thinking predictions in terms of where we see firms going and what other transformations we can expect to see in the future?

  • The changing regulatory requirements have not increased the entry barriers for firms.

  • We have come a tremendous way in a short period of time. Old tried and true technologies are not going away with the emergence of new technology though. There are now just more (and better) solutions for firms to choose from – not a complete change in the industry, but ways to make firms more efficient and increase quality.

  • Firms should use technology to understand what the inherent costs are to running a portfolio.

  • There is widespread industry acceptance of outsourcing, and with the emergence of the cloud, there are certain front, middle and back office processes moving away from the core of the fund.

Here are some other resources on Hedge Fund Transformation you might enjoy:

Hedge Fund Outsourcing Guidebook
Photo Credit: iStock Photo

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