UK - Hedge funds have been urged to develop new investment strategies and update their technology to accommodate a flood of institutional investment.
A roundtable discussion on ways of addressing cost, risk and compliance through technology concluded that hedge fund managers needed to alter and update their systems to benefit from rapid growth in the market.
Trade management solutions provider Omego managing director Richard Hughes said the discussion focused on key industry concerns about how managers could increase transparency and efficiency on the back of growing interest from the industry.
One of the main conclusions drawn by participants at the event, which Omego hosted, was that sophisticated technology was required to meet institutional demands.
Asset Alliance International managing director of hedge fund-of-funds Michael Azlen said: “Two traders in a room with a Bloomberg will not attract institutional-quality capital. Institutions need to see more than one person managing the money – a dedicated person in risk management and transparency from top to bottom.”
Hughes agreed: “Historically the demand for technology, such as trade management systems has come from the larger, traditional fund managers.
Today, however, the hedge fund and prime broker industries increasingly see these types of systems as fundamental to the validity of their business models.”
Participants also felt that operational risk would hinder future trading activity unless hedge fund managers met their due diligence requirements.
And they found adopting a greater degree of straight-through processing to the investment process could unlock key benefits.
Omego business development manager EMEA Dominic Rieb-Smith said: “STP is critical for firms’ competitive edge. When margins are tight and the market is competitive, you can actually lower your overall costs and increase your profits through operational efficiency.”
He added: “The value of automation is magnified in the hedge fund industry, particularly with start-up operations, where there is a need for scalability from day one in order to cope with volatility in trading volumes without incurring increased cost and head count requirements.”
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