Hedge Fund Investing: A Practical Approach to Understanding Investor Motivation, Manager Profits, and Fund Performance

Technology Environment and Service Providers

The choice of a firm's technology partner or service provider is another critical decision that affects a firm. Many firms’ principals come from technology-rich banks or larger hedge funds with a well-developed platform. It is both time-consuming and expensive to re-create this environment. Managers often look for help from their prime brokers and from outsourced technology solutions offered by firms such as EzeCastle. Most hedge funds of any merit employ at least one or two technologists to work with the prime broker or outsourced technology provider. Firms have to make a wide range of decisions related to their choice of phone system, Internet and cable provider, desktop environment including both hardware and software, and server environment. They must balance choices related to owning hardware, data, and servers or using cloud technology to increase scale and lower costs, albeit with potential real or perceived concerns over data security.

Scope of Services

A review of the scope of services of several popular outsourced technology providers quickly makes it clear that hedge funds can benefit from a wide range of solutions by partnering with an information technology vendor. Use of an IT partner can create scale, improve efficiency, and lower costs for a manager.

Solutions that are available to hedge funds from third-party IT firms include:

Business continuity planning

Data backup and recovery process

Disaster recovery testing ...