Understand your vision and build tech to support it
Emerging hedge fund managers looking to succeed in the industry should consider what is most important to their firm and the vision they have for their fund. Then, with this set, the fund should partner with a managed service provider to build the technology infrastructure needed to secure it. Hedge funds can then find the technology components that best suit their business rather than pouring time and money into a complex structure which may not fit their purpose.
“Each manager has a unique footprint and you have to treat them as such,” explains Bob Shaw (picture), Vice President of Technical Architecture at Eze Castle Integration. “When a startup hedge fund is spinning out of another shop, they sometimes try to mimic what that other shop did, which can be very costly or misaligned with their funds strategy. Success will come from understanding that you don’t have to chase what someone else is chasing. You need to know what you want to accomplish, stick to your business or trading model and find a technology solution that makes you successful.”
At the other end of the scale are those managers who, in an effort to keep cost down, make use of an unspecialised, small IT company to get up and running. Shaw warns against this approach: “Firms often find they outgrow this support model. When managers ask for the bare minimum to get up-and-running quickly, they commonly make compromises that require a future IT change or reconfigure to support investor requirements once the firm grows. This change results in the firm duplicating IT onboarding costs as well as introducing risk during the migration process as they move to a more secure and scalable solution.”
To help avoid this scenario, Shaw advises managers to look into the future and have conversations with their IT partner on where the firm will be in 2, 3 or 5 plus years. “What may appear to save a firm money on Day 1, can end up costing considerably more Day 2,” says Shaw, “Not just from a straightforward cost perspective, but also, switching managed service providers or platforms can introduce operational and availability complexities or risk as you move into a whole new environment which addresses the advanced security and technical needs of the firm.”
In addition to selecting a managed service provider (MSP) that understands a firm’s current and future requirements, it is also critical to partner with a company with deep security expertise. “Choose the right MSP to work with. There is considerable value in working with an IT partner who knows your industry and understands the security and regulatory needs. Someone outside the industry may omit critical security layers required by regulators and investors,” Shaw cautions.
This does not mean all hedge funds should start off with complex structures. Rather, Shaw outlines: “Protecting your sensitive data is key, you need to focus on building a secure foundation which can be scaled upon. You can build a technology platform, typically fully managed in the cloud, which is secure with flexibility to add additional “bells and whistles” in the future. Taking a consultative, security-first approach is something we do for all our clients to ensure they are fully covered.”
VP of Technical Architecture, Eze Castle Integration
Bob Shaw is VP of technical architecture at Eze Castle Integration, where he is responsible for working with clients to design and implement their technology infrastructure solutions, including creating technology budgets, evaluating and recommending infrastructure needs and address operational priorities. Bob has over 20 years’ experience serving as trusted technical consultant to firms in financial vertical.