For hedge fund managers currently outsourcing or buying their core tech, a key question presents itself: are we using the best vendors and/or products? Depending on factors from the provider’s pricing and features, through to the manager’s investment strategy and location, the range of options available, or lack thereof, can be startling. This second section examines the key providers, helping to understand why managers outsource and buy – and why some might be considering a change.
And so, to the direction of travel. Through fresh data and a series of Sankey charts, section four ties this report together, showing our earlier findings in a new light and mapping out the ‘journey’ through technology of various types of hedge fund manager. Here, we not only identify the types of approach that were, are and will be popular in the hedge fund industry at large, but the specific types of journey undertaken by tenured managers and the lessons they have learned.
If the mix of businesses in the hedge fund industry is eclectic, so too is the way its constituents approach technology. To help establish a starting point for our journey, the Insights team divided the industry into three: core tech primarily developed internally, purchased off-the-shelf, or provided by an outsourced/hosted solutions. The first section of this report explores the top-level results, looking at how different managers, with different needs, are using technology and seeking trends, by business size and style, within each category.
To talk about technology is to talk about the future. Section three embraces this mantra, exploring tech experimentation, recruitment and budgets, and the effect they have on a hedge fund manager’s approach to core business technology. Here, we provide insight into the managers who have created a scalable and sustainable infrastructure, what those yet to act have planned, and what this all means for the hedge fund industry at large.
While many hedge fund managers talk a good talk when it comes to culture, diversity and SRI, the real question is do they walk the walk? As noted, an increasing number of investors want to see their fund managers taking steps to foster change, even if relatively few have a concrete idea of what these endeavours should look like. In this final section, we examine the policies, procedures and initiatives managers have implemented and the emphasis investors place on them.
Perhaps more so than other soft factors, company culture is an essential aspect of running a 21st century business. Investors not only want to see a working environment that keeps employees appropriately incentivised, they want to see a culture that nurtures staff and creates a platform for quality investment decisions. And as competition has made it harder for managers to differentiate themselves by investment strategy, company culture has become an opportunity to demonstrate the unique qualities investors crave. Section three explores the latest sentiment on the topic.
If diversity is currently in the spotlight generally, few industries are feeling the heat more than investment management. The definition of ‘diversity’ varies greatly, and so to ensure focus, HFM has chosen to define it as relating specifically to gender and ethnicity. How diverse are hedge fund workforces – by gender and ethnicity – and do investors care? With this in mind, the following section takes the same approach as the first: gauging investor and manager sentiment on the topic, with the ultimate aim of understanding whether investors are asking substantive questions.
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