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Technology to ease hedge fund struggles

Navigating the volatile environment while delivering accurate, timely data to clients is critical for hedge fund managers to succeed in these challenging times. Declan Quilligan, Head of Hedge Fund Services, Citco Fund Services (Ireland) Ltd. discusses the areas of growth and pressure these managers are facing.

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Navigating the volatile environment while delivering accurate, timely data to clients is critical for hedge fund managers to succeed in these challenging times. Declan Quilligan, Head of Hedge Fund Services, Citco Fund Services (Ireland) Ltd. discusses the areas of growth and pressure these managers are facing.

Can you outline the industry trends which have been driving growth and development within your firm over the past year?

Last year was very different to 2021, with some seismic shifts in the macroeconomic backdrop as well as the war in Ukraine, sparking an increase in volatility which became the driving force for markets.

According to our data, the big story of 2022 was climbing volatility and divergence across asset classes. For example, commodities strategies were the top performers, with a weighted average return of 20.43%, followed by Global Macro funds which achieved returns of 16.75% – meanwhile, volumes were higher than ever before amid a surge in volatility, with Equity and Equity Swaps/CFDs once again accounting for the lion’s share of volumes throughout the year at an asset class level.

Treasury also saw a record year and across the Citco group of companies (Citco) platform there was a 43% year-on-year increase in volumes in 2022, which included a succession of record-breaking quarters.

In light of the uptick in demand for our Middle Office Solutions, we launched new functionality for clients using our Æxeo® Treasury solution – our award winning tool that enables clients to receive payments across multiple counterparties through Citco’s SWIFT Service Bureau (SWIFT) messaging network, providing real-time view of their payments – so all users could access the platform via their mobiles, enabling them to keep track on the go.

What are the primary challenges your firm and your clients are facing and what is critical to these being overcome?

The first is data access – despite advantages of technology, it means we are more dependent on accurate and timely data being available to all participants. Therefore, asset servicers must learn to deliver data quickly and digitally, directly into managers’ toolkits. 

The second is increasing complexity. As managers increase diversification across asset classes in search of returns, moving into hybrid strategies and accessing a wider range of investment vehicles, the complexity of investment administration will continue to grow. Managers will demand access to emerging technology faster than ever, whether that be through proprietary offerings or via external asset servicers. 

Third is digitising – whether it be for services such as investor relations, or the capital raising process, such business offerings will continue to demand more advanced technology that enables asset servicing to be done more efficiently and effectively.

Lastly, volatility. With the interest rate backdrop almost unrecognisable from previous years, Citco also saw new records set for Treasury volumes as more hedge funds increased their interest in this space. This has meant that clients more than ever want to be able to review, track and action payments on the go – which our Æxeo® Treasury solution now provides to clients.

How can you best ensure you deliver value-add to your client base?​

Our clients are our raison d’être and thanks to our unwavering excellence in client service, Citco’s name is renowned in the industry. We are constantly adapting to meet our clients’ changing needs and provide them with the best solutions on the market. 

The Citco product team is focused on developing market-leading solutions. With over 900 Citco staff focused on technology and innovation initiatives, we are constantly seeking to develop better ways to automate an increasing number of processes within our teams.

As an independent firm that has been driven purely by organic growth, we spend our time and money innovating even better technology and processes, rather than trying to integrate our latest acquisition. The reason that innovation matters so much is that our clients too are raising the bar, so it is vital that we upkeep this.

What is your outlook for the hedge fund space for the coming year and how is your firm best placed to support clients navigate the environment? ​

Regulation is always a driver of demand and we expect significant impact in the year ahead and thanks to our investment in talent for industry leading expertise, we will support our clients in navigating this landscape.

As the wealth management industry continues to grow, we see the hedge fund industry continuing to play a significant role as investors look at alternatives investments as part of a wider diversified strategy. At Citco, we believe that there will be prosperous opportunities ahead for our clients and ourselves as proven, trusted partners to our clients. 


Declan Quilligan, Head of Hedge Fund Services, Citco Fund Services (Ireland) Ltd

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