Hedge fund industry matures, requires investment


The hedge fund industry, despite some huge challenges presented by the credit crunch, continues to mature for both big players who are increasingly institutionally focused, and smaller firms that are sticking with their traditional high-net-worth customer. All are being wracked by business forces that have made hedge fund technology servicing a strong business.  

Eze Castle Integration, a technology service provider to hedge funds, has a revenue growth of 26 percent in 2008 so far (mid-year), and added 60 new clients. London has been a bright spot. It's disaster recovery and storage area network solutions have been in particularly heavy demand. But there are plenty of other areas of growth. Compliance and risk management to name two.  

Research firm Celent notes that a big growth area might be middle-office operations. While back office functions are almost entirely outsourced, the post-trade, pre-settlement work may be better left to third-parties, especially when it comes to OT derivatives. More hedge fund administrators, such as Citco, GlobeOp, and LaCrosse Global Fund Services, seem to be adding middle office services to their suites. Celent's report also notes that in general, the technology requirements have risen to the point that traditional sell-side service providers are now aiming at hedge funds. The list includes SunGard, Murex, and Calypso.  

So despite the dynamic change that has engulfed many funds, it's clear that if you want to build a permanent infrastructure and endure in the industry, you need to support your core competencies with the best technology available. This will not be cheap, but it is necessary. - Jim