Paladyne Systems has published a study of hedge fund outsourcing.
“The huge growth in the number of hedge funds has created an intense competitive environment which has pushed managers to invest in non-traditional products and markets in an effort to maximize performance,” says Sameer Shalaby, CEO of Paladyne Systems. “The resulting operational challenges, coupled with increased pressure from regulators and institutional investors, have created the need for world-class infrastructure and tight operational control, which in most cases is only feasible as an outsourced solution.”
The paper reports that hedge fund managers have responded to the rapid growth by investing in outsourced technology. The growth is attributed to the increased demand for infrastructure and daily middle-and-back office services. Hedge fund managers are now faced with the decision to either build a technological infrastructure or utilize an existing solution that can support complex investment strategies.
“Such investment strategies typically include over-the-counter products and emerging markets, both of which require comprehensive operational infrastructure and IT support,” says Scott Alderson, president of Paladyne Systems. “At the same time, infrastructure costs have skyrocketed in recent years creating a cost barrier for most hedge funds. Hedge fund managers have responded by trading their privacy concerns for more cost-effective outsourcing solutions.”
The paper concludes that the recent trend is still at its infancy and will continue for several years.