In some ways, the actions of crypto-fund managers could have as big an influence on the hedge fund industry as the brand-name quantitative firms developing AI and alternative data techniques. What ramifications could there be for traditional managers, for example, if a raft of investment funds launched by non-investment managers proves successful? This report’s third and final section will explore what these developments, and more, might mean for the future of hedge fund management. And in doing so, we embark on that most foolish of errands – a series of predictions.
Perhaps unsurprisingly, the uptake of disruptive technologies among hedge fund managers generally is not as widespread – yet – as media attention might suggest. After all, many managers are too busy concentrating on survival to make big investments in untested tech. That said, our research does suggest that a significant number of hedge fund firms are using alternative data methods and, to a lesser extent, AI/machine learning technologies. This next section looks at how they are using them and who – branded firms or otherwise – is behind the progress.
Such has been the proliferation of news stories and articles discussing alternative data, machine learning, and blockchain that one could be forgiven for thinking every hedge fund manager worth its salt was incorporating one or all these technologies into its business. No doubt many are, but how many? We start this report with an attempt to measure the scale of the uptake of disruptive technologies among hedge fund managers, shedding light on the types of firm behind the trends.
Having investigated the security and regulatory implications of using either a third-party data storage provider or keeping data in-house, the report’s second section covers physical and cloud-based uptake as it stands within the hedge fund industry. We investigate the combinations of cloud and physical data centre solutions that managers are using, the various merits of each type, and the factors managers consider when making business decisions around data storage.
Hedge fund managers use many combinations of data centre types – in-house racks, third-party centres, both, or neither – but the factors driving their choices will not necessarily result in a model best suited to their needs. In this first section, the Insights team looks at the strengths and weaknesses of internal storage, data centres and hybrids, and the extent to which managers are prepared for the events and challenges that come with having a physical location for their data.
Migration to the cloud can be a daunting prospect, particularly for firms without in-house IT expertise, and knowledge of the challenges involved is essential. Whether it be moving past an internal bias towards physical rack space, ensuring one’s cloud configuration is compliant with all pertinent rules and regulations or finding the right provider, the challenges involved are many and diverse, but surmounting them can provide a hedge fund manager with a range of new and exciting possibilities.