Investor demand for data transparency is set to drive hedge fund firms’ operating costs up by more than 8 per cent over the next five years, hedge fund chief financial officers are predicting.
Investor demand for data transparency is set to drive hedge fund firms’ operating costs up by more than 8 per cent over the next five years, hedge fund chief financial officers are predicting.
New research by Intertrust Group — which quizzed 100 CFOs across the UK, Europe, North America and Asia, from hedge funds collectively representing a total AUM of USD7.3 billion spanning a range of strategies – indicates the growing clamour for greater transparency from investors will place increase burdens on hedge funds’ ops teams.
The study explored the ways in which investor reporting trends are likely to evolve between now and 2021, and how that will impact hedge funds’ businesses.
One-third (32 per cent) of those CFOs polled expect they will have to deliver live or daily updates on risk parameters. One-in-four (25 per cent) anticipate this level of frequency for data on fund returns and cybersecurity threats.
Overall, CFOs anticipate that investors will, on average, want to receive updated strategy level performance data every 12 days. Some 42 per cent expect investors will require live or daily updates on strategy level performance data, and 31 per cent anticipating having to supply this information on a weekly basis.
The research indicated that three-quarters (73 per cent) of CFOs believe operating costs will be pushed up by some 8.1 per cent on average as a result of these more stringent client demands on data transparency over the next five years.
Specifically, two-thirds (65 per cent) of CFOs quizzed anticipate having to expand their technology framework in the next five years, while 60 per cent will scale up their in-house finance team. Some 38 per cent said they will outsource more functions, while roughly a quarter (26 per cent) will retain their existing balance between outsourcing and insourcing.
To counter rising costs over the next five years, 83 per cent of CFOs will look to maximise operational efficiencies in risk, while nearly three quarters (73 per cent) will focus on the treasury function, with 72 per cent focusing on data analysis.
“Demands for more data is a growing phenomenon among investors globally. Hedge funds started becoming more transparent some years ago but to meet increasing data requests they must either invest substantially to build systems and technology to manage the data in-house or outsource,” said Jonathan White, global head of fund sales at Intertrust Group.
“The in-house route is fundamentally complicated and costly, requiring they become managers of technology and operations as well as managers of assets. Alternatively, outsourcing partners that have already invested significantly in modern systems can deliver high quality services to fund managers, who can then focus on managing assets.”
