2013 Benchmark Study Reveals Top Hedge Fund Applications
The results from our Global Hedge Fund Technology and Operations Benchmark Study are in and here is a snapshot of the 2013 findings. We surveyed 538 buy-side firms across the United States, UK 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 (60%), asset/investment manager (13%), private equity firm (8%), fund of hedge fund (5%), non-financial firm (5%), advisory firm (1%), broker dealer (1%), venture capital firm (1%), quant fund (1%), or ‘other’ (3%).
The firms resided in three different asset classes: 30 percent reported their AUM as $100 million and under; 32 percent fell between $101 and $500 million; and 38 percent reported over $500 million in assets under management.
In regards to investment strategy, long/short equity continues to dominate as the most favorable with 45 percent of respondents reporting this to be their primary investment strategy. Other preferred strategies include fixed income (8%), credit (7%), global macro (6%), emerging markets (6%), distressed debt (5%), and event driven (4%). The top prime brokers employed by firms in 2013 are Goldman Sachs, Morgan Stanley, Credit Suisse, JP Morgan and UBS (same as last year).
OMS: Firms use order and execution management systems in order to support trading, operations, compliance and portfolio management. Once firms have passed their initial launch phase and start seeing investment growth, a robust and efficient solution becomes critical to their continued progress and development. Our survey found that most firms rely on Eze Software’s Eze OMS, followed by Bloomberg’s Asset and Investment Manager (AIM), Advent’s Moxy and RediPlus EMS.
Market Data & Analytics: Bloomberg continues to be at the head of the pack as far as market data services and analytics in the financial industry. Respondents reported that 92 percent are using Bloomberg for market data and 82 percent for market analytics.
Research & Document Management: Even with the growing need for research and document management tools, more than half (55%) of firms responded that they are not using a formal RMS tool. Most firms (34%) are still using an in-house or proprietary system for research and document management. For those firms using a specific tool, Advent’s Tamale, Microsoft’s SharePoint, or FactSet's Code Red RMS are the most common.
Middle & Back Office
Portfolio Accounting: Advent Software continues to be the primary market leader in regards to portfolio accounting with its APX and Geneva products remaining the top two choices among investment firms surveyed. Both APX and Geneva users represent 27 percent of the market share, accounting for more than half of the total responses from firms surveyed.
Risk Management: We are still seeing slow growth towards the adoption of risk management solutions despite the high demand for firms to manage risk in all areas of business- including portfolio, compliance and operational risk. This may be due to firms outsourcing risk management capabilities to a fund administrator instead of using a formal RMS system. For those firms that do have a formal solution in place, the most popular vendors used outside of proprietary systems include Advent, Calypso, Risk Metrics and SunGard.
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 was the top choice among our survey respondents, followed by SS&C GlobeOp, and Goldman Sachs. Northern Trust, State Street and US Bancorp also made the list of top administrators.
Message Archiving: A vast majority of survey respondents (82%) are relying on Global Relay for their email and IM message archiving services. This figure also includes Eze Castle’s Eze Archive service, which is powered by Global Relay. The remaining firms are primarily using Smarsh, Frontbrige, Postini, Symantec or Microsoft Exchange.
Mobile Technology: We continue to see firms using BlackBerry (92%) as their primary mobile solution. However, iPhone use has increased because of the recent trend in BYOD and the deployment of mobile device management solutions.
Like past years, we expect to see the rise in adoption of cloud services will remain a major game changer in how hedge funds and investment firms choose the technology that supports their operations. According to the results of our survey: Examining Cloud Usage within the Investment Management Industry, which came out earlier this year, nearly 9 out of 10 firms are using cloud services currently or plan to do so in the near future. Additionally, we expect to see firms select their technology based upon the influence of investors. Investors have become more knowledgeable about the technology landscape and are placing greater demands on the quality of technology used by investment firms. Firms should expect to see greater expectations, and in return be optimistic for greater rewards!