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Launching a Hedge Fund in Hong Kong: Technology Considerations

By Amisha Shah | Thursday, December 12th, 2019
Launching and operating a successful hedge fund can be both personally and financially rewarding. At the same time, it can be a challenging and sometimes overwhelming experience. Questions managers are found asking themselves typically include; How should I structure my business? What service providers do I need? What do I need to do first?

In today’s financial services industry, technology plays a major role in defining a firm’s capabilities and competitive advantages. Emerging managers who have worked in a larger, full-service organisation, may have found themselves constrained by a separate technology department. When taking ownership of decisions around technology, managers are free to implement a technology environment that supports their personal business vision. 

Today’s blog article will explore five common technology mistakes as well as how to avoid them, for emerging managers embarking on the launch of a new hedge fund in Hong Kong.

1.    Looking for the perfect solution

During the planning phase of your new fund, the idea that there may be one or more solutions that can meet 100% of your technology requirements can be an appealing thought. Some vendors are attempting to develop turnkey platform to deliver on this promise. However, unless your business is narrowly focused, the chances are that a single vendor will meet every aspect of your needs are very slim. Realistically, you will likely need to negotiate, purchase and deploy systems from multiple vendors and service providers. Selecting a single provider and relying on them to be around in the years ahead may cause your firm to assume more concentrated business risk than you are willing to accept.

2.    Insufficient planning for the future

Not envisioning how their practice will look over the longer term—in three or five years—could lead to emerging managers making short-sighted decisions and selecting inadequate solutions. Despite an intense focus on completing the immediate tasks pertaining to the launch of a new fund, understanding what the fund will look like in the future is also important. Managers should consider whether they have the necessary technological systems to support them as their fund grows and flourishes. 

3.    Failing to understand how much you rely on technology today

Emerging managers are advised to think about the work they currently and the systems needed to implement this work (email, reports, phones, quote feeds, etc.). When then suggest considering the workflows of a new hedge fund and the systems and support required to facilitate these. More than likely, a new hedge fund will need most – if not all – of the same systems, with some additional bespoke requirements. Managers are advised to use these notes to compile a shopping list when building out their technology platform. 

4.    Overestimating your capacity to manage

Managing technology is a profession unto itself. Unless emerging managers want to spend most of their free time building servers and managing networks, we advise getting help to manage technology effectively. For project-related work (“one-and-done” jobs), consultants and contractors can be used. And, for the ongoing interaction and maintenance of the technology side of things, a third-party technology provider might be suited. Also, we recommend firms to consider hiring the support of administrative personnel that is skilled with technology. 

5.    Short-changing the training options and resources 

Once managers have all of their new systems lined up, the next step is to learn how to use them to their full potential to truly leverage its capabilities and operate efficiently. Most vendors provide a mixture of onsite or web-based training options. If it is reasonably priced, new funds will most likely want to take advantage of it. Often, the vendor’s professional services arm will know all the quirks of the software package so well that many important details are glossed over during the sales process. 
They can help managers to develop the correct workflow to maximise their investment, as well as getting past some of the inevitable challenges. It is also worth asking the vendor if there are any established user groups for their software and systems. Often, these communities can be invaluable resources for getting up and running more quickly and with less frustration. Avoid rushing the installation in order to make a set deadline and address any subsequent issues that may arise. 

We hope you found this article informative. Our technology enthusiasts have penned a guidebook detailing the technical considerations for launching a hedge fund in Hong Kong with input from leading law firm, Simmons & Simmons on the legal considerations. This framework aims to provide managers with practical options, knowledge and resources to help make informed business decisions for a successful launch.

Download your complimentary copy here!



 
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