2014 Benchmark Study Results: Top Hedge Fund Applications Revealed
The results from our Global Hedge Fund Technology Benchmark Study are in, and here is a snapshot of the 2014 findings. You can find the complete report here. We surveyed 279 buy-side firms across the United States, United Kingdom and Asia in order to discover their front, middle, and back office technology and application preferences.
All survey respondents fell into the following categories within the financial industry: hedge fund (58%), asset/investment manager (13%), private equity firm (3%), fund of fund (3%), and family office (3%). Additionally, 13 percent fell into an ‘other’ category, which included financial firm types such as venture capital, advisory, fund management, quant and wealth management.
Firms surveyed fell into three asset groups: thirty-three percent (33%) reported their assets under management (AUM) as less than $100 million; twenty-eight percent (28%) fell between $101 and $500 million; and the majority (39%) reported over $500 million AUM.
In regards to investment strategy, long/short equity continues to dominate as the most favorable with 50 percent (50%) of respondents reporting this to be their primary investment strategy. Additional preferred strategies include credit (8%), fixed income (6%), emerging markets (5%), event driven (4%), and distressed debt (3%). Twenty-four percent (24%) of firms fell into an “Other” category that included a wide variety of investment strategies such as commodities, derivatives, merger arbitrage, relative value, securities, global macro, and long only. In 2014, the top primes employed by firms are Goldman Sachs, Morgan Stanley, JP Morgan, Credit Suisse and UBS (same as 2013 results).
OMS: Firms use order and execution management systems in order to support trading, operations, compliance and portfolio management. Once firms have evolved from their initial launch phase and begin seeing investment growth, they need robust, efficient solutions in order to continue growing and progressing. Our survey found that the majority of firms rely on Eze Software Group’s Eze OMS, followed by Bloomberg’s Asset and Investment Manager (AIM), RediPlus EMS and Advent’s Moxy.
Market Data & Analytics: Bloomberg continues to lead the pack as far as market data services and analytics in the financial industry. Respondents reported that ninety-six percent (96%) are using Bloomberg either exclusively or alongside a second solution.
Research & Document Management: The majority of respondents reported that they outsource the responsibility of managing research materials and documentation. Forty-three percent (43%) of firms are using in-house or proprietary solutions. For those firms using a specific tool, Microsoft’s SharePoint, Advent’s Tamale, or FactSet's Code Red RMS are the most common. Another research management solution gaining popularity is Ledgex Systems.
Middle & Back Office
Portfolio Accounting: Advent Software continues to be the primary leader in regards to portfolio accounting with its Geneva and APX solutions remaining the top two choices among investment firms surveyed. Almost half of those surveyed are using one of the two Advent products.
Risk Management: Risk Management is inclusive of a wide variety of thoughts: everything from cybersecurity and infrastructure risk to portfolio and systemic risk. According to our survey results, adoption of risk management solutions is still slow as a reported fifty-six percent (56%) are not using solutions to mitigate portfolio risk. For those firms that do have a formal solution in place, popular vendors utilized include Advent, Bloomberg, FT Options, Indus Valley, iVolitility, Orchestrade and The Insight.
Outsourced Administration: While not all firms choose to utilize an outsourced fund administrator for more comprehensive services, those that do tend to work with a variety of different vendors. Citco is the top administrator choice among our survey respondents, followed by SS&C GlobeOp, Northern Trust, State Street and JP Morgan.
Message Archiving: A large majority of survey respondents (57%) are relying on Global Relay for their email and IM message archiving services, followed by Eze Castle’s Eze Archive service, which is powered by Global Relay. Smarsh and Frontbrige round out the top four services.
Mobile Technology: We continue to see firms using BlackBerry (83%) as their primary mobile solution. However, iPhone use has made great leaps and increased from forty-three percent (43%) in 2013 to sixty-four percent (64%) in 2014.
We foresee the adoption rate of the cloud not letting up as not only startup firms are leveraging cloud solutions, but also large, established firms. This migration to private cloud environments has completely revolutionized the way firms do business. Visible benefits to hosting applications in the cloud—cost-savings, flexibility and scalability—will fuel firms to continue moving in that direction and may change the results we see in a year’s time if any of these applications and vendors do not offer positive experiences in the cloud.
We hope our 2014 Hedge Fund Technology Benchmark Study will serve as a guide and assist firms in making these critical decisions.
For more survey results, listen to the full webinar replay below.