Keen to grow your business? The big question is can you do it profitably, without suffering significant increases in staff and costs?
Asset growth is no longer a surefire route to boosting profitability. Industry-wide performance for 2015 is in the doldrums – for instance, the HFRX Global Hedge Fund Index is down 1.63per cent year-to-date, while many firms are struggling to reach their high water marks. Poor performance is also adding weight to the debate on fees. The era of ‘2 & 20’ may not be quite over, but it is disappearing.
At the same time, cost pressures are on the rise. Institutional investors – increasingly the primary source of hedge fund capital – are pushing for more customisable managed accounts or funds of one, which are more expensive to run. Satisfying institutions’ due diligence requirements demands high operational standards and ongoing service excellence. Regulation is a major, and growing, cost factor.
Fit for growth?
For some hedge funds, ageing systems and manually-intensive processes mean the only way to support growth, and meet evolving investor and regulatory expectations, is by adding headcount and further ramping up costs. This approach is both unsustainable and dangerous – it embeds too much expense, inflexibility, subpar service, and operational, regulatory and reputational risk into the business.
The alternative is to leverage a scalable, integrated technology infrastructure that automates the entire transaction lifecycle, and equips firms with powerful and customisable tools and applications. The benefits are proven and manifold, and include:
- Ready access to critical data and analytics, providing greater insight into and control over clients’ portfolio performance and risk exposures, and allowing for more informed investment decisions and the potential for higher risk-adjusted returns.
- Flexibility to innovate and expand into new asset classes and geographies to exploit investment and asset gathering opportunities – without being hobbled by crippling upfront investment costs and operational overheads.
- Increased operational efficiency to enhance cost/income ratios and reduce operational risk.
- More automated and improved control, management oversight and regulatory compliance.
- Faster, more responsive and personalised capabilities for better client servicing.
- Freeing staff from mundane tasks to focus on more productive, higher-value activities.
If hedge funds are to grow profitably in the face of a sustained squeeze on fees and costs, then choosing the right technology infrastructure has never been more important.
Does your technology help or hinder your growth ambitions? Take this 60 second test to identify your platform’s strengths and weaknesses, and pinpoint those areas you need to improve.
