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Citi Prime Finance’s 2011 IT Trends & Benchmarks Survey
Equipment Nearing End of Life:
Even if a hedge fund has
suffcient space in their locally hosted data center, they may
still look to migrate some of their infrastructure off-premises as
their current hardware whose expense has been amortized
down to zero over three or four years, reaches the end of
its useful life. In such instances, the costs of replacing the
equipment either directly or via their integration frm may be
weighed against the substitution of a fxed-fee contract with a
managed service provider.
More Synchronous Data Replication is Required:
With the
emerging emphasis on data management and investment
decision-making tools, more hedge funds are building custom
applications that draw together large quantities of data from
upstream systems. These tools may offer up critical insight
into the effectiveness or exposures of the investment portfolio.
Ensuring that this information is readily available may prompt a
hedge fund to reassess their disaster recovery plan. It is typical
for many organizations to run asynchronous disaster recovery
where information is exchanged between the production and
recovery environment at intervals. For these new analytic
tools, the hedge fund may rather desire a “live-live” connection
between their environments. This capability might be most
effectively and effciently realized by creating a new disaster
recovery relationship with a managed service provider.
Each of these trigger events may offer a hedge fund manager an
opportunity to evaluate their infrastructure and make a change
However, the beneft to be gained by this move has to be weighed
against the amount of disruption the change may create.
Older and larger hedge funds with entrenched, self-hosted
infrastructures are less likely to be interested in emerging cloud
technologies. The majority of these participants have custom
built the majority of their software and, as noted earlier, they
host that software locally within data centers they maintain
themselves, both on- and off-premises.
Any cost savings these franchise frms may achieve by moving
to a managed service or hosted software model would be
outweighed by the opportunity cost they would lose in terms of
other projects that would need to get de-emphasized, and the
burden of managing such a massive undertaking.
Investment
Decision-Making
Financing & Collateral Management
Risk Management
Portfolio Management
Trading
Focus on
Alpha
Investment
Rationale
Availability of Hedge
Fund Focused Systems
Controls &
Optimization
Foundational
Capabilities
“Most of our infrastructure is on-premises, as the basement
data center is part of our lease. But that decision to host
ourselves is a bias based on fund vintage and size; wemight do
it differently if we started again. But there is an opportunity
cost to migrating your infrastructure off-premises, and it’s
just not worth it to us at this point.”
– CTO of a UK-based Managing> $ 5 Billion USD Hedge Fund
Chart 13: Evaluating Hedge Fund Software Options