Hedge IT Blog

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 we are going to expand on the 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 provides 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. 

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Tomorrow, we are co-hosting an exciting seminar in New York City with our friends at KPMG on the topic of launching a hedge fund. The half-day event, Hedge Fund Launch 2.0: Navigating the New Environment, will feature expert panel sessions on variety of topics including technology, regulations, capital raising, application platforms and more.
 
One panel we’re particularly interested in – beyond the technology panels, of course – is Corporate Essentials, a program focused on the often forgotten-about aspects of launching a new business. These aspects include human resources, compensation, insurance and real estate. Here’s a sneak peek at some of the content our panelists will be discussing at tomorrow’s event:

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In case you missed it, this week the Pentagon released its Annual Report to Congress looking at the military and security developments involving China.  According to the New York Times, the report is virtually the first time “the Obama administration has explicitly accused China’s military of mounting attacks on American government computer systems and defense contractors, saying one motive could be to map 'military capabilities that could be exploited during a crisis.'"

The report states that cyberwarfare capabilities could serve Chinese military operations in three key areas.

• First and foremost, they allow data collection for intelligence and computer network attack purposes.

• Second, they can be employed to constrain an adversary’s actions or slow response time by targeting network-based logistics, communications, and commercial activities.

• Third, they can serve as a force multiplier when coupled with kinetic attacks during times of crisis or conflict.

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It is becoming cliché to say, but the investor due diligence process has truly evolved from a ‘check the box’ activity to a detailed and analytical process.  Today, hedge fund investors want to see a tested investment strategy coupled with institutional-grade business processes.
 
Here at Eze Castle Integration, each year we help more and more hedge fund clients complete the Technology portion of investor due diligence questionnaires (DDQ).  So we thought it would be helpful to share some of the more common technology related questions we are seeing.  Not surprisingly you’ll see security and disaster recovery questions on the list.
 
As you consider your responses to these questions, keep in mind that in some cases investors are more concerned with your decision process as opposed to seeing the “right” answer.  The reality is that often the “right” answer varies from firm to firm and depends on a number of factors, including investment strategy.

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Yesterday, we hosted a webinar, “Going Social: What Investment Firms Need to Know about Social Media Compliance” along with Global Relay, an Eze Castle Integration partner and provider of enterprise message archiving and monitoring services. Global Relay's vice president of sales, Bryan Young, and our own vice president of marketing, Mary Beth Hamilton, discussed a range of topics including the changing SEC guidance on social media, compliance requirements for hedge funds and key components of instituting a social media policy at an investment management firm. Read on for a recap of the event, or watch the full replay now.

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Next week – Tuesday, May 7 through Friday, May 10 to be exact – one of the largest annual gatherings of investment management professionals will be taking place at the beautiful Bellagio Las Vegas. The SALT Conference will feature over 100 expert speakers participating in 36 panel discussions, individual speeches and breakout seminars throughout the four-day event. The focus of this year’s conference is on macro-economic trends, the political environment and opportunities for alternative investment firms within the context of the global economy.
 
As in past years, the SALT Conference is sure to be a who’s who of industry professionals. Past keynote speakers have included such notable names as Bill Clinton, George W. Bush, Al Gore, Mitt Romney, Colin Powell and Tony Blair. Who is on the docket to speak this year? What will the specific discussions and hot topics be? Following are some highlights we’re looking forward to at next week’s event.

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In the wake of the 2008 financial credit crisis, investment firms have recognized the need for more robust liquidity risk management tools and procedures. However, due to shifting regulations and detailed fund and investment structures, fund of funds, private equity firms, hedge funds, and institutional investors continue to grapple with liquidity management and reporting within their investment portfolios. The following is a high level overview of both the liquidity risk challenges facing firms today, and the ways in which some fund managers are overcoming these challenges.

What is liquidity risk, and how does it affect funds?
Liquidity is the extent to which an asset or security can be bought or sold in the market, while not impacting the asset’s price. The concept of liquidity is comprised of illiquid assets, which are the result of liquidity risk and cannot be instantly sold due to value uncertainty and lack of a market. Liquidity risk refers to the concept that an asset or security cannot be traded at the rate necessary to achieve returns and bypass losses. In the last several years, worldwide economic challenges including rising liquidity costs, a more uncertain market and lower levels of market assurance have contributed to the liquidity management challenges facing funds. Liquidity risk’s ability to negatively impact and compound other types of risk, such as credit risk, also has far reaching consequences for the financial markets. These consequences make it even more imperative for firms to get a handle on their liquidity risk management practices.

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Last week, we hosted a webinar with eSentire on best practices for managing security risks. eSentire is the leading managed security service vendor protecting 25% of the global hedge fund market by AuM. During the webinar, the company's director of marketing, Mark Sangster, and our own vice president of client technology, Steve Schoener, explored topics including the scope of cyber threats, the anatomy of a cyber attack, continuous security monitoring and security policies and procedures for hedge funds to consider. Read on for a full recap of the information covered during the event.

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Today, we're excited be hosting the 2013 London Hedge Fund Cloud Summit at the Prince Philip House in London. The event features a variety of industry experts participating in thought-provoking panel disccussions focused on the cloud adoption trends shaping the investment industry. Conversations will touch on everything from the differences between public and private clouds to cloud security and application hosting.

In honor of this event and to provide a visual to help encapsulate the many benefits that come from leveraging a private cloud, we have published a new infographic entitled “You Might be a Private Cloud User If…” Check it out to see the top 10 signs that you are likely a private cloud user. For more information and details on the 2013 London Hedge Fund Cloud Summit please visit the event page. Also, be sure to look out for a recap of the event here on the Hedge IT blog next week!

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Yesterday our VP of client technology, Steve Schoener, presented on a California Hedge Fund Association webinar about building an institutional infrastructure at today’s hedge funds. A lofty topic (so consider this a basic primer), Steve focused on four key discussion areas, which we’ll recap here. They were:

• Investor Expectations of IT

• On-premise & Cloud solutions: Which is right?

• Security Risks & Best Practices

• Disaster Recovery How-Tos

You can watch the 30-minute webinar now or keep reading below.

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