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Proof of concept

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By A Paris – Any hedge fund managers who were unsure of the power of technology and the ability to work efficiently using virtual media have most likely been converted over the course of the last year. 2020 was a spectacular proof of concept that remote working and outsourcing can facilitate business processes and support managers in achieving their objectives.

A survey by KPMG and the Alternative Investment Managers Association (AIMA) finds an overwhelming 71 percent of respondents agree the current experience of working remotely convinced them they could achieve better cost efficiencies if they outsource some of their operations. 

The move to delegate functions to third parties is also being driven by a desire to move to a variable cost environment. This, according to 62 percent of respondents, can enable more flexibility in changing AuM environments. 

This ecosystem of service providers has been brought into the foreground as managers sought additional support to ensure a smooth transition to remote working and help hasten the move to digitisation and automation.

Hedgeweek celebrates the firms which have excelled in this space, taking on the minutiae of day-to-day tasks or providing technology solutions to assist managers in generate the best returns for their investors.

Bhas Nalabothula, head of European institutional rates at Tradeweb comments on the year past: “The word ‘unprecedented’ has been used a myriad of times to describe the year 2020. Not for lack of imagination, but because it genuinely captures a period that made us re-invent the way we think and operate. This was particularly true for financial services, where technology proved to be indispensable in keeping individuals and firms connected during the pandemic crisis. As a company, we moved fast to a virtual working environment without any disruption to our operations or services.” Tradeweb was voted this year’s Best Trading and Execution Platform.

“Most businesses that adopt a digital platform of some kind would have found the move from “office” to “home” relatively seamless. However no-one would have envisaged working from home from such a lengthy period of time,” notes Tom Woollard, managing partner and head of Europe,at Edge Technology Group. The firm won Best Cloud Services Provider. “Digital platforms were therefore adapted to enhance the use of unified collaboration through messaging, conferencing, and video functionality, to allow staff to operate in as close to normal operating conditions as they had typically done so in the past. 

From a technology perspective, fund managers are becoming increasingly demanding of their vendors. Dr. Elliot Banks, chief product officer, BMLL Technologies, this year’s Best Data Science Solution Provider, outlines: “Utilising vast data sets presents new resource and cost challenges, and the buy-side community is having to invest time and resource to achieve performance and predictability. Firms are increasingly turning to buying-in data and analytics capabilities. BMLL is also seeing growth in the uptake of Level 3 data for strategy backtesting to drive alpha generation and model validation. 

“Budget allocations for third-party data are rising accordingly. Further, there is a growth in demand from clients for length of history, and the quantum of data now available to those who have it is putting those who don’t at a disadvantage.”

In fact, the aforementioned survey finds in EMEA, 86 percent of firms included in the study are investing more in improving the business’ digital infrastructure/IT capabilities. Around half are also re-evaluating their firm’s cloud strategy (51 percent) and investing in cybersecurity (49 percent).

George Ralph, global managing director and CRO of RFA, winner of the Best Cybersecurity Provider award, outlines: “In today’s environment, the key trend continues around how we manage data. As more and more people get involved in their data journey, they will discover more anomalies in the patterns of their behaviour as a business, how they operate and also the functions of the business, leading to a desire to embrace digitisation to improve visibility and performance.”

Jack Seibald, managing director and global co-head of prime brokerage & outsourced trading, at Cowen, winner of the Best Outsourced Trading Solution Provider award, reflects: “As the global economy slowly comes out of the pandemic induced coma, populations receive vaccinations and resume some more normal level of activity, there will again be a period of significant outperformance/underperformance for sectors of the economy and markets, and investors will again start to contemplate the timing of the end of monetary accommodation. As this occurs, hedge fund managers will again have an opportunity to deliver idiosyncratic returns.” 

In the words of Justin Sycamore, director of sales, EMEA, SS&C Eze, winner of Best Cloud Based Technology, highlights: “The year ahead is sure to bring new challenges of its own, but hedge funds have proven their value in this climate and not only adapted, but in many instances, thrived.” 

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