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A How-To on Appraising the Strengths and Weakness of a Hedge Fund Application

By Mary Beth Hamilton | Tuesday, May 21st, 2013

We were recently asked by a COOConnect member about the best sources for information about the strengths/weaknesses of the various hedge fund applications including front, middle and back office.  Since we know many folks have this same question, today I am going to expand on the original answer given by our expert, Mark Coriaty.

Now the way a hedge fund uses an application will vary based on its investment strategy, and therefore the perceived strengths and weaknesses may vary as well.  However, there are multiple ways to establish a baseline of strengths and weaknesses.

Service Provider Reports: Balancing Bias with Value

First up are free reports from hedge fund service providers such as Eze Castle Integration.  Each year we publish a benchmark study that outlines top applications used in select front, middle and back office categories by hedge funds.  This report will provide a baseline of the top three application vendors used in each category, but doesn’t dive into specific feature sets.  The report can be downloaded HERE.

Vendor reports can be helpful in getting an initial understanding of the most frequently used applications and top features used by firms.  You should always consider the source, as some vendor reports or whitepapers will be biased. 

Industry Analyst Reports: Balancing Cost with Real Life

Next up are analyst groups, such as Aite Group, Celent and CEB TowerGroup, who regularly publish reports looking at hedge fund applications.  Aite Group, for example, published a report titled “Buy-Side OMS Market Update 2013: Calm Before the Storm?” in March 2013.  These reports can provide insight into the top application players in each market.  It should be noted that some reports must be purchased, and free ones may be slightly biased if they are funded by an application vendor.

Here is a handy list of where to find reports published by these firms:

  • CEB TowerGroup: HERE
  • IDC Financial Insights: HERE

Phone a Friend

Finally, talking to hedge fund peers is extremely valuable in understanding the strengths and weaknesses of various applications.  In addition to calling the references provided by the vendors (who you can assume are happy), try and find a few other users to speak with.  Here are some questions to ask:

  • How long have you been using the application? 

  • Did you receive any incentive for being a customer reference?

  • Why did you select this application?

  • Has the application met your expectations?

  • What are the most important features to your firm?

  • Did your firm customize the application?  If so, what was that process like?

  • What features do you wish they would add to the application? Areas for improvement?

  • How responsive is customer support?

  • Is there anything you would have done differently as part of the selection or implementation process?

Happy App Searching!

P.S. Here is another link to our 2012 Hedge Fund Technology Benchmark Study. 

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