Broad industry concerns about the lack of transparency and the need for risk controls in hedge funds are driving sales of Risk Management Systems. According to a newly released report by Carbon360, Risk Systems will account for nearly 20% of total buy-side IT spending in 2010. By fiscal year 2011, Carbon360 predicts spending by the buy-side on Risk Management and Portfolio Management Systems to exceed $9.68 billion. Carbon360 last conducted this study in 2006, from that time there has been a considerable amount of consolidation in the space, including the recent acquisition of Riskmetrics by MSCI. Other notable acquisitions include SunGard’s acquisition of GL Trade (which acquired FNX Solutions) and FRS Global’s acquisition of Iris Integrated Risk Management.
The major providers of Risk Systems have all nearly doubled head count since 2006 to match the demand for risk solutions in an industry that relies on a robust risk infrastructure to monitor investments and report exposure to clients. In light of the market events of the past 2-3 years many investors continue to push for vendor provided solutions as opposed to excel based risk models.
While many large hedge funds have implemented risk systems, the expensive platforms remain out of reach for many smaller funds. ASP and service provider solutions have emerged to meet this demand. Fund administrators have led the way by implementing risk platforms and then packaging them into a scalable solution affordable to the funds they administer.
The report includes 22 Risk Management solutions across 15 vendors covering market, credit, enterprise, and energy & commodity risk. The platforms are organized by: master data management, investments handled, analysis features, valuation, reporting & graphing, user interface, integration, technical attributes, and services & costs.
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